Advisor Blog

In a recent Investment News article, a study found that nearly 60% of investors feared being ripped off by their investment advisor.  Perhaps that's not astounding in the wake of Bernie Madoff and other high-profile scams that have left an impression on the investing public.  But, this sort of fear is entirely unnecessary if investors simply make informed decisions about who they choose to trust.

Bernie Madoff was able to steal from investors because his firm maintained custody of the investors' accounts (and, frankly, because FINRA - the self-regulatory organization that was responsible for oversight of the Madoff brokerage was asleep at the switch).  There was no independent third-party oversight of the assets.  This is easy to avoid.  Simply make sure that your advisor employs a qualified custodian to hold all client assets.  Your monthly statement should come directly from the custodian and you will have continuous online access through the custodian's website to monitor your accounts.

Our firm uses TD Ameritrade Institutional and Schwab Institutional as custodians for our client accounts.  We refuse to handle any client assets and follow strict compliance guidelines to be certain that the Securities and Exchange Commission does not consider us to have custody over client accounts.  We allow our clients to choose between the custodians based on cost and service.  Just like the fee-only compensation model avoids conflicts of interest, an advisory business should be designed to avoid any concerns about the security of client assets.