Truthfully, there isn’t a yes or no answer to this question. I could say “yes, you can trust online stock brokers”, but then one of you can encounter a broker who wants to cheat them out of money. Or I could say “no, don’t trust them”, but maybe you’ve already encountered brokers who were helpful and weren’t out to scam you.
At the end of the day, it depends on the person behind the screen since one answer cannot be generalised to everyone. However, there are several steps you can take to ensure that the broker you chose is one that can be trusted, so let’s have a look at these steps together and learn how to spot a scammer from the real-deal.
The Best UK Brokers
After learning how to separate the good from the bad, it’s time to make a decision and pick a broker. As you are well aware, there are hundreds of brokers who all claim that they’re the best and most reliable. While not all of them might be saying the truth, BuyShares has compiled a list of the best brokers in the UK!
1. Beware Of Cold Contacts
Be careful of any broker or financial advisor who contacts you without being asked to do so on behalf of a company that you have never done business with. The communication could take the shape of a letter, a phone call, or even an email. Do not allow yourself to be duped by invites to investment seminars that promise free lunches or other incentives in an effort to encourage you to let your guard down and invest without proper consideration.
Also, be especially wary of callers that use high-pressure sales tactics, promote chances that only come around once in a lifetime, or refuse to deliver written information regarding an investment.
2. Speak With The Broker
Regardless of whether you’re looking for a broker or financial advisor, you need to feel comfortable with the individuals who will be offering you with recommendations, goods, and services. Inquire a great deal about the services offered by the firm as well as its previous work with customers whose requirements were comparable to your own.
Ask about the nature of the relationship that will exist between the two of you. When making recommendations on investments, for instance, financial experts are held to a norm known as “fiduciary,” which mandates that they put the interests of their clients ahead of their own.
This is a higher level than the so-called appropriateness standard, in which the expert is just expected to offer suggestions that are compatible with what is in the client’s best interests. The fiduciary standard is something that is always required to be followed by investment advisors, but it is not something that broker-dealers are required to do. However, it is possible to find a broker-dealer who is willing to adhere to the fiduciary standard.
Go to a different broker if you are unable to get plain answers, the individual looks rushed, or in any other way they are unable to present you with complete and clear information. Always make sure to inquire about the rates, fees, and commissions involved.
3. Do Your Own Digging
Google can tell you a lot about a person. Simply search their name and see what pops up. If you see a ton of articles about how this person scammed other people out of their money and is a complete fraud, then you know to stay as far away from the person and their service as possible.
Take the case of Lee Dana Weiss as an example. He presented himself as a renowned and intelligent investment advisor, but in reality, he defrauded his clients for more than $7 million. A quick Google search about the person will reveal things their website or themselves didn’t tell you about.
You can find out about past achievements and happy customers, or find out they were previously investigated for fraud. Whatever you find will help you in deciding whether the company or the person are a good fit for you.
4. Check Your Statements Often
Putting your finances on “autopilot” mode is the single worst thing you could do with your money. If you carefully review your statements, regardless of whether you receive them online or in paper, you may be able to identify fraudulent activity or even mistakes at an earlier stage.
If the returns on your investments are lower than expected or if there are unexpected shifts in your portfolio, you should investigate the situation and ask questions. You shouldn’t put your faith in assurances that are too sophisticated for you to fully grasp. Stock broker fraud isn’t a myth, but something that people unfortunately go through, so make sure you don’t fall victim to it.
If you are unable to obtain answers that are straightforward, you should request to speak to someone higher up. You should never worry that people will think you are stupid or a nuisance if you ask questions.
5. When In Doubt, Withdraw Your Funds
Remove your money from the financial advisor if you have any suspicions that they are engaging in unethical behaviour. After that, you should register complaints with the same state, federal, and private regulators whose websites you looked at when you were researching the financial profession in the first place.
There are a few actions that you might take if you believe that you have an argument with your broker or advisor that is supported by solid grounds.
A large number of individuals working in the financial industry are members of a charter organisation. Since these organisations also have standards and codes of ethics, filing a complaint with each of them is something that should be considered.
In the event that you have a grievance with a Certified Financial Planner (CFP), for instance, you have the option of submitting it to the Certified Financial Planner Board of Standards. You can get in touch with the Association of Investment and Research if the allegation is levelled against a Chartered Financial Analyst (CFA).
Another option available to you is to get in touch with the securities commission in your state or province. Complaints regarding brokers, consultants, and financial planners are fielded by departments that can be found in every state and province in the country. If none of these solutions solves the problem, your last resort is to seek the advice of a legal professional.
The Bottom Line
You can never be sure who the person behind the screen is, so make sure to do your research and find out what you can about them and the company they work for.
Remember that your money and assets will be on the line here so it’s important not to make rash decisions.
