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Avoiding financial malpractice in Massachusetts


Before hiring a Massachusetts financial adviser, clients need to know who they are working with. Asking the right questions leads to making the right decision.

To make sound financial investments, better prepare for retirement and improve their overall financial health, some individuals in Massachusetts hire a financial adviser. Anyone who decides to work with a financial adviser should know how to look out for themselves and their money. Without knowing what to look for and which questions to ask, it can be all too easy to become involved in a financial malpractice case.

Check the adviser’s professional credentials

Before deciding whether to work with a specific financial adviser, say, one who specializes in real estate transactions, it is best to check all candidates’ professional backgrounds. Those in need of financial advice should ask about the adviser’s professional license, as there are three different types of adviser: investment advisers, brokers and insurance agents. Advisers can have two licenses. Inquiring about professional certifications is another way to better determine if an adviser is legitimate. Common certifications approved by the Financial Industry Regulatory Authority, a government-authorized self-regulatory organization, include Certified Financial Planner, Certified Financial Fiduciaries and Certified Public Accountant.

Another way to look into an adviser’s professional background is to ask for her or his Central Registration Depository number. Using this number, potential clients can check to see whether the adviser has any complaints filed against her or him or if the person has connections to disreputable business practices. Besides asking for a Central Registration Depository number, potential clients can also lookup financial advisers on the FINRA BrokerCheck site.

Understand how an adviser gets paid

Knowing a thing or two about financial adviser compensation helps clients avoid becoming victims of financial malpractice. Usually, advisers pay themselves from a client’s investment, which is wholly legal. Other ways advisers earn an income consist of yearly percentages of managed assets and fees for buying specific funds. One thing to bear in mind is that just because a compensation method is legal does not necessarily mean that it is the best compensation plan for clients.

Know when to look for another adviser

Sometimes, clients may receive warning signs that their financial adviser does not have the best intentions for them. Advisers who make their clients feel pressured to accept an investment may have ill intentions, and the same is true of advisers who do not seem to care much about educating clients about their investments. Another time to consider firing a financial adviser is when that adviser invests funds in a single investment rather than diversifying the funds.

Those who find themselves victims of financial malpractice in Massachusetts due to the actions of a shady financial adviser should explore their legal rights. Speaking with a legal professional could point victims in the right direction and ensure that they received their deserved compensation.