Maybe we’re just overthinking things because retirement is getting closer. I know the financial industry is heavily regulated, but I can’t stop worrying about one day losing all our investments and money. What could stop this from happening (or more accurately, what could let it happen)?
Thanks for any help.
Your assets should be with a custodian. Check the fine print on your statement (it might be Schwab, Fidelity, or Pershing). If the advisor tries to take money out without authorization, that would be a felony, and these institutions have steps to freeze or recover your funds. If it makes you feel better, even advisors at bigger firms could do the same thing.
Does he have access to your accounts? Does he trade for you? If yes, there are some risks. Some advisors only make recommendations for you to act on, which reduces the chances of them doing something shady. Others have more control over your account.
For instance, I handle 60% of our assets at one brokerage, but I also use Vanguard’s managed account service for the rest. If anything went wrong, it would be Vanguard’s problem to handle.
@Xavier
Unless you have Marge Simpson as an advisor, she’s not going to go rogue.
Ladies, pinch.
Remy said:
@Xavier
Unless you have Marge Simpson as an advisor, she’s not going to go rogue.
Ladies, pinch.
Do you know how old you have to be to get this joke? I do. I’m old enough to get this joke.
@Logan
Oh my. Homie.
Robin said:
Did he promise he wouldn’t take your money? If not, I’d be concerned.
He pinky promised.
Remy said:
@Xavier
Unless you have Marge Simpson as an advisor, she’s not going to go rogue.
Ladies, pinch.
I deleted my joke because this one is so much better.
Having permission to trade in your account (called “discretionary authority”) doesn’t mean they can withdraw money. At Schwab, for example, all external transfers need a setup with proper documentation, including a voided check with your name and address. Outbound wire transfers also face heavy scrutiny. Changing your address used to require a paper form with your signature. It’s tough to make a move without you knowing.
Did he promise he wouldn’t take your money? If not, I’d be concerned.
Robin said:
Did he promise he wouldn’t take your money? If not, I’d be concerned.
I might be more worried if he promised not to do it.
Consider working with a well-known investment firm to stay safe.
Your advisor might be independent, but what brokerage or RIA firm do they work for? That company is responsible for overseeing them. Have you checked their background on FINRA’s broker check site? You can see if they have any complaints there.
The industry is heavily regulated. If someone does something criminal like that, they won’t get far. I’d suggest discussing your concerns with your advisor directly. The problem with independent advisors is they own their clients, which is great, but if something happens to them, you might have trouble finding someone new. Bigger firms would have someone take over quickly. But if you’re not fully trusting your advisor, that’s a bigger issue.
If they’re a fiduciary, they have legal responsibilities to you as the investor. If they just stole your money and transferred it to their account, that would be a crime, and it would likely be easy to prove.
@Leith
He’s not a fiduciary. I’m not sure what that means.
Avery said:
@Leith
He’s not a fiduciary. I’m not sure what that means.
You should only use a fiduciary to manage your money. The others are more like salespeople, just trying to make money from fees. RUN away from this ‘advisor.’
I bet $100 your advisor isn’t beating the SPY ETF over any 5-year period you choose.
It’s always possible they could do something wrong, but it’s hard. There are lots of protections in place. It’s a good idea to spread your money across a couple of brokerages or accounts. If you have separate 401Ks or IRAs, those could count as well.
It’s not impossible; I’ve seen it happen, but it’s difficult. There are so many safeguards in place. Your funds should be held by a custodian, not directly by your advisor. You should never write checks made out to your advisor directly…