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Yelp for financial advisers

By Sheyna Steiner · Bankrate.com
Tuesday, June 18, 2013
Posted: 5 pm ET

Investors have a few resources when it comes to checking out the people to whom they entrust their hard-earned money. There are sites such as Yelp, for instance, that compile reviews from anyone on nearly anything. Financial planners, advisers and brokers can all be found on Yelp, but it's hit or miss. My area has no reviews for local financial planners, but there are many reviews for advisers, planners and brokers in bigger cities.

As with all user-generated content, one has to consider the source and throw in a grain of salt, or maybe a ton. More official records -- for instance, on complaints -- are kept by regulators, but they may not be 100 percent reliable, either.

Stock brokers must register with the Financial Industry Regulatory Authority, or FINRA. Their disciplinary records can be viewed through the site BrokerCheck.com, but that may not be as helpful as it would first seem.

Last week, The New York Times reported that brokers with a spotty record have been increasingly requesting to have certain items expunged from their records. Because of the way the system is set up, their requests are granted more often than not.

There aren't a lot of complaints in FINRA's database, according to Seth Lipner, a professor of law at the Zicklin School of Business of Bernard M. Baruch College in New York City and partner at Deutsch & Lipner. There are many brokers who have no problems and nothing untoward in their record.

Some complaints don't show up on official records, though. Until 2009, complaints were made against firms, and the individual broker was left out of it, Lipner says.

Since 2009, complaints against the firm are also held against individual representatives, which has added to the number of aggrieved brokers seeking absolution. In some cases, they were told to sell bad securities at the behest of their firms.

In the aftermath of the financial crisis, complaints against brokers and firms soared, which is why there are now increasing requests to have some complaints erased, says Lipner.

FINRA would like to streamline the process and make it easier for brokers to clear their records -- or at least partially clear their records. The plan will be sent to the Securities and Exchange Commission in August for review, Reuters reported in the story, "Plan for quashing broker complaints to meet resistance."

Ultimately, "BrokerCheck is still a valuable resource, but it's not the only thing you should be thinking about when you decide who to hire to manage your money. The data on BrokerCheck, just like TripAdviser, has holes on both sides: over-inclusive in some ways and under-(inclusive) in others," Lipner says.

How do you vet people you do business with?

Follow me on Twitter: @SheynaSteiner.

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Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.

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