Page 20 - Provoke Mag Vol5

Analyzing
the
Financial Advisor
-Dr. Shawn Washington
Picking the right stock means finding a solid invest- ment that increases in value without losing principal. The number of investments available in the market- place makes it difficult to identify one or two prod- ucts. There are also different ways to invest, i.e. real estate, equities, mutual funds, options, private place- ments, insurance, etc. Financial advisors help inves- tors with suitable choices based on personal objectives and goals. Finding the right financial advisor can be as risky as selecting the right stock.
Financial Advisors are trusted professionals work- ing for a financial services firm who have a fiduciary responsibility to help you manage your money. The investor compensates the advisor through commis- sions or an advisory fee based on the total amount of assets under management. There are strict regulations on charging a client both a fee and a commission. Ad- visors cannot “double-dip” on investment transactions and this practice is typically prohibited by the invest- ment firm.
Advisors and firms registered with the Securities and Exchange Commission (“Commission”) must adopt a compliance program consisting of written policies that protect investor interests. These policies require an advisor to follow procedures reasonably designed to prevent violations of securities laws. Laws built to protect investors from fraud mandate that firms put the necessary controls into place to ensure that inves- tors are not harmed. Although the guidelines of regu- lations seed the internal control systems, an investor would only need to encounter one rogue advisor to lose his life savings.
The integrity of the compliance program is a fun- damental component that influences the behaviors of financial advisors within the firm. Weak programs that fail to reprimand financial advisors may encourage corrupt behaviors. Investors should remember that
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Strong systems that monitor, test, and correct bad behav- iors strengthen the likelihood of fair and ethical conduct. Choosing the right advisor comes with the willingness to trust another person with our money. We should not want to give our life savings to complete strangers with- out some investigation. Assurances must be found to en- sure that our money will be safe and hopefully increase in value. We want the financial professional to be knowl- edgeable about the stock market and guide us toward the best investment decision.
Well-designed compliance programs are meant to pre- vent fraudulent activity by the firm and its employees. Frustrations come from the markets when investors continue to face harm by rogue advisors. The fiduciary responsibilities required to manage one’s money comes with extraordinary risk to the owner. Most firms do not train a financial advisor on how to make investment de- cisions that relate to market trends and algorithms. The development of these skills originates from formal edu- cation, training, and experience.
The talent used in successful investment selection is the same talent used to take financial advantage of the investor. Knowing how to monitor the difference could help prevent fraudulent activity in your account. In most cases, the investor should review their statements and be willing to ask questions until the answers provide clarity.