When you invest significant money, you want to make sure your financial advisor or broker is trustworthy. Keep a watch out for warnings that could materialize in any of the following ways.
Guarantees. Your broker guarantees an investment will perform a certain way. Every investment involves some risk, and a broker cannot guarantee performance.
Pressure. A broker pressures you to make a quick decision on an investment, implying that if you don’t act right away, you will lose the opportunity. Legitimate investment opportunities don’t disappear overnight.
Unregistered Security. A stockbroker tries to sell you an unregistered security. Unregistered securities aren’t subject to all the laws designed to protect investors and are often sold by fraudsters.
Absence of Documentation. You are offered a stock, mutual fund, or bond but are told there is no documentation for it. If a stock or mutual fund doesn’t have a prospectus or a bond doesn’t have an offering circular, it could be unregistered or otherwise fraudulent.
Too Complex to Be Good. If the investment the broker describes is so complex that you can’t understand it and you don’t understand the risks involved, and they can’t be made clear to you, don’t invest.
Too Good to Be True. A security you are offered appears to provide consistent high growth and high returns even during market dips. Every investment can experience some ups and downs.
Investors who don’t pay close attention to their brokerage account statements are often targets of fraud. To protect yourself, review your statements regularly for unauthorized trades, excessive trading, and other possible signs of broker misconduct or negligence.