Advisor Background Checks—Not a Bad Place to Start


Investment News recently published an article that touts the SEC approval of a FINRA rule that grants investors access to the FINRA database in order to perform “background checks” on prospective financial advisors. On the surface, this public service makes sense and I see no reason for a reputable advisor to fear this. What I hope is not lost on investors, however, is that this is just the first step in a larger process of evaluating those you would trust for sound financial advice.

Often in abstract life, we’re able to employ binary decision making: “Is it right or wrong—simple or difficult?” In the real world, many decisions are not that simple. Effective decision making is about establishing a process by which facts are collected and then framing the right questions to ascertain which decision is best.

When we seek to hire any professional—a lawyer, a doctor, an engineer or an architect—we struggle to know what questions we should be asking. It’s a classic example of you don’t know what you don’t know. Sure, it’s great to check the Internet for instances of malfeasance or malpractice in their backgrounds. But there are thousands of financial advisors whose backgrounds raise no concerns. Does that mean they are right to provide you with financial counsel?

The way I see it, there are two additional steps in choosing an advisor. First, we should engage an expert in the field we are searching—in this case, financial planning—to learn what we should be searching for and which questions we should be asking. It’s like asking one doctor to tell you what questions you should be asking another doctor. Getting an expert to frame the criteria by which we evaluate a professional also helps us understand the facts necessary for reaching a valid conclusion.

Getting the questions right is half the battle, and well worth the cost.

The second step in evaluating the suitability of an advisor is to frame the questions to prospective advisors in a manner that reveals the information they will need to give effective counsel. An advisor may be brilliant in one area, but it may not be the area where you need advanced expertise. Knowing the right criteria to consider helps us understand which facts are the most essential in determining whether an advisor is the right fit for our goals.

FINRA is starting an appropriate conversation by providing this elementary tool, but we can offer our clients and prospects a far superior service. We can perform these background checks ourselves, outline the proper questions to ask any financial advisor and showcase all the information that clients must provide in order for any qualified advisor to render good advice.

As reputable advisors, this government-led solution provides a great opportunity for us to demonstrate to our social circles what a true professional does. This level of transparency is an ally—not something to fear.

Frank Muller

As CEO of Provasi Capital Partners, Frank Muller brings nearly 30 years of experience in building and managing multi-channel distribution services. Frank has been a featured contributor in numerous industry publications, bringing his unique insights and perspectives to relevant issues impacting financial advisors and their clients.

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Frank Muller