What is FINRA BrokerCheck? A helpful guide
Editorial staff, J.P. Morgan Wealth Management
- FINRA BrokerCheck is a free tool that allows you to research the professional backgrounds of brokers and brokerage firms.
- It provides certain details about employment history, registrations and disciplinary actions.
- Using BrokerCheck can help you make informed decisions when selecting a financial professional.
Choosing a financial professional can feel like a lot of pressure, especially if you're new to investing. After all, you're trusting someone with your financial future. With so much at stake, it's crucial to have reliable tools to help you vet brokers before entrusting them with your hard-earned money.
That's where FINRA BrokerCheck comes in – this free, user-friendly tool offers valuable information into the backgrounds of brokers and brokerage firms, helping you make informed decisions. Here is some information about using BrokerCheck and a few other resources to evaluate a financial professional.
Understanding investment professionals
Before diving into BrokerCheck, it's important to understand the difference between brokers and advisors:
- Brokers: These professionals buy and sell securities like stocks and bonds on behalf of clients in their brokerage accounts. They typically earn commissions and are regulated by the U.S. Securities & Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Brokers are required to pass specific exams, such as the Series 7, to obtain their licenses, which you can verify on FINRA BrokerCheck. Brokers may give incidental advice related to a transaction, however, brokers are generally not fiduciaries. Brokers have a different standard of care under the SEC's Regulation Best Interest and must act in the best interest of their clients when making recommendations, ensuring that they prioritize their clients' interests over their own.
- Investment advisors: These professionals get paid to give financial advice. Advisors have a fiduciary duty to act in their clients' best interests at all times. This means they must avoid conflicts of interest, disclose any potential conflicts and prioritize the financial well-being of their clients over their own. They provide fee-based advice and are regulated by the SEC or state securities regulators. Advisors' fiduciary obligations are a key distinction that can impact the advice and services they provide.
- Dual registrants: Some professionals are both brokers and investment advisors, offering both transactional services and fee-based advisory services.
Tools like BrokerCheck are key for evaluating both individual qualifications and the broader practices of their firms.
What is FINRA BrokerCheck?
BrokerCheck is a free tool developed by FINRA to provide public access to information about brokers, brokerage firms and investment advisor firms.
FINRA is a self-regulatory organization that helps protect investors and keep financial markets fair. FINRA also provides a forum for clients and firms to settle disputes.
That’s why BrokerCheck has evolved into a resource for anyone vetting financial professionals, offering detailed records of brokers’ professional backgrounds, employment history, licenses and any disciplinary actions or complaints.
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How to access and use FINRA BrokerCheck
Researching an advisor with FINRA BrokerCheck is simple. It's as easy as visiting the BrokerCheck website (i.e., brokercheck.finra.org) and entering the name of the individual broker or brokerage firm in the search bar. After reviewing the search results and selecting the correct profile, you'll be able to access a detailed report on the broker's history.
Each BrokerCheck report is divided into clear sections that provide key insights:
- Summary: Offers a snapshot of the broker's qualifications, including licenses and registrations
- Employment history: Details the broker's work history over the past 10 years, both within and outside the securities industry
- Qualifications: Lists the exams the broker has passed and their current registrations
- Disclosure events: Includes information about certain disciplinary actions, customer disputes, regulatory actions and criminal or civil proceedings
What BrokerCheck doesn't include
While BrokerCheck is a good starting point, it doesn't capture every detail about a financial professional. It focuses primarily on brokers and brokerage firms, with less detailed information about investment advisors, like specifics about fees, conflicts of interest or advisory services offered.
To find more information about advisors, you'll need to turn to the SEC's Investment Adviser Public Disclosure (IAPD) database and review the advisor's Form ADV.,
Understanding Form ADV and the IAPD
What is Form ADV?
The Form ADV is a mandatory filing for registered investment advisors, providing detailed information about their business practices, fee structures, disciplinary history and conflicts of interest.,
The form is divided into multiple parts:
- Part 1: Contains general information about the firm, including its location, number of employees and types of clients served
- Part 2 (brochure): Offers a narrative description of the firm's services, fees, investment strategies and any conflicts of interest
- Part 3 (Form CRS): Summarizes the advisor-client relationship, including key services and fees
How to access Form ADV
To access a financial advisor's Form ADV and learn more about their background, head to the IAPD website (i.e., adviserinfo.sec.gov). From there, simply enter the name of the individual or firm you want to research into the search bar. If the advisor is registered, you'll see detailed insights into their practices, fees and any disciplinary history.
How to interpret all this information
Think of researching a financial professional like getting to know a potential business partner. You're looking for signs that they're reliable and experienced while keeping an eye out for any red flags that might indicate issues down the road. Here are some things to look for:
Positive indicators
- Consistent employment history with reputable firms
- Relevant certifications and licenses
- Absence of disclosure events or complaints
Red flags to look for
- Multiple disclosure events or unresolved customer disputes
- Frequent job changes or gaps in employment history
- Disciplinary actions by regulatory authorities
If you don’t see anything that concerns you, consider scheduling a conversation with the particular advisor to discuss your goals. If you find red flags, ask the professional for clarity. It's their job to make you feel comfortable; otherwise, move on. Remember, this is your financial journey, so it's worth taking the time to get it right.
The bottom line
Researching financial professionals is a critical step in safeguarding your investments. FINRA BrokerCheck provides a wealth of information about brokers and brokerage firms, while resources like Form ADV and the IAPD offer deeper insights into investment advisors. By using these tools effectively, you can make informed decisions and build a relationship with a trustworthy financial professional.
For important disclosures, please refer to the disclosures section for detailed information.
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Editorial staff, J.P. Morgan Wealth Management
