Trusting someone to invest your money is a big leap. In this Money Matters report, NY1’s Tara Lynn Wagner has some tips for when you are shopping for a broker.
Are you thinking of investing in the market? Susan Axelrod of the Financial Industry Regulatory Authority - also known as FINRA - says there are many brokers eager to work with you.
"There are about 660,000 registered representatives out there in the market," she says.
So how do you choose who to work with? Axelrod says the same way you choose just about anything - with the click of a mouse.
"Before we go to a restaurant, we often look at the reviews on Yelp. Or, before we go to the movies, a lot of folks like to look at Rotten Tomatoes to see what other people say about the movie,” says Axelord.
In this case, she says, you will want to use BrokerCheck, a tool at FINRA’s website that lists not only the broker’s experience, but also the experience other investors had with them.
"Whether they have customer complaints, whether they have disciplinary history - which is really important," says Axelrod.
Once you have narrowed down your choice, it’s time to meet and talk about your goals - so your broker can get an idea what you should be investing in. This does not mean you should blindly take their word for it. There are red flags that may indicate you should be taking your trust and your money elsewhere, like guaranteeing you a certain rate of return.
"If you see steady returns over periods of market volatility, that they are still saying ‘Don't worry about it, I can get you these returns regardless,’ that would also be a red flag," says Axelrod.
She also recommends being wary of the hard sell.
"Someone saying ‘You've got to invest in this today, this deal is going to go away, don't discuss it with anyone.’ Any professional you deal with should not pressure you and if someone is starting to do that, it should really give you pause," she says.
Once you have set up your portfolio, stay on top of your investments by checking your statements regularly. But remember, this is the stock market and no matter who you work with, there will always be risk.
"None of us can individually impact whether the market is going to go up or down. That's what happens and people's investments can go down in that market. It doesn't mean it's because of any bad action by any individual broker."
For more information or to use BrokerCheck, go to FINRA.org.