If you’ve ever bought a used car, chances are, you’ve pulled its CARFAX report before buying. These reports are pretty incredible, because they are chock full of information that you’d want to know before buying a used car:

•   How many owners the car has had

•   Service history

•   Accident history

•   Title history (including salvage and flood titles)

•   “Lemon” cars

•   And more!

After all, no one wants a lemon car. If you bought a car without checking the CARFAX report and later found out it was a lemon or a salvage title vehicle, you’d be in for a world of hurt. You’d be stuck with a car that doesn’t work like it should — all that money would have gone to waste. And it’s not like you’d be able to sell it very easily to get your money back, either!

Now imagine the equivalent of dealing with a “lemon” of a financial advisor. What if you didn’t do your due diligence and invested with an embezzler or someone running a Ponzi scheme? The financial consequences could be even more devastating.

Yes, you can usually access general information like an advisor’s current firm or the number of years they’ve worked as an advisor on their website, but this doesn’t paint the whole picture. You need more in-depth information — the equivalent of a CARFAX report.

Thankfully, with AdvisorCheck+ reports, you can get exactly that.

“Most people would love to pull up a background check on someone that they are planning to work with, especially if they are planning to entrust them with a large sum of money over the course of their entire life,” says Leonard Kim of AdvisorCheck. “AdvisorCheck+ Reports allow people and investors to do just that, on any currently or previously registered financial advisor of their choice,” Leonard continued. 

AdvisorCheck+ Reports: Your Gateway to Better Information

A CARFAX equivalent for financial advisors has been missing from the industry for a long time — but now, with an AdvisorCheck+ report, you can get the level of detail you need to make an informed decision.

An AdvisorCheck+ report gives you a full report on several important categories, such as:

•   Criminal records

•   Global sanctions

•   OFAC (Office of Foreign Assets Control) listings

•   Bankruptcies

•   Sex offender records

•   Other legal disclosures

•   Multiple social security numbers

•   Recorded as deceased

•   Prison address on file

In each of these categories, the main dashboard will highlight which items are potential red flags, and which have no known records. If there are no known records, then there is currently no cause for concern with that particular area. Areas that have been marked as red flags require some extra digging — and in the AdvisorCheck+ report, you’ll get the full details of any disclosures related to these flagged categories.

With this information in hand, you get a much deeper look at a financial advisor than what might be publicly available on their website. You get the in-depth details on what’s going on “behind the scenes.” Knowing if your financial advisor has a questionable past could be an indicator of potential problems you might encounter if you chose to work with them.

It’s the difference between buying a car because the pictures look nice, and actually pulling that CARFAX report and taking the vehicle for a test drive.

Currently, AdvisorCheck members can order three of these in-depth reports for free. You can use the Advisor Search feature to look up advisors by name, location, CRD or firm name. Most importantly, the information in our reports is constantly being updated — just like you would expect with a CARFAX report. You can have confidence that the information you see is up to date.

Why In-Depth Advisor Disclosures Matter

When comparing advisors, a simple list of disclosures doesn’t tell the whole story. Sometimes they are major red flags — other times, it could come down to a minor issue. Fortunately, when you pull up an advisor’s disclosure history with an AdvisorCheck+ report, you get the level of information you need to identify the disclosures that should make you think twice before working with an advisor.

For example, some financial advisors might have a disclosure on their record because a client was dissatisfied with their results and filed a complaint. A judge could determine that no wrongdoing occurred and dismiss the case. Even though the financial advisor was found to have not done anything wrong, a disclosure would still appear on their record.

Is that a reason to rethink working with a particular advisor? Maybe.

But these types of disclosures can often be taken with a grain of salt …

On the other hand, an advisor might have a disclosure on their record because they were found guilty of unethical practices and had to pay regulatory fines and reparations to their clients. This would be a major red flag, because it demonstrates a clear history of dishonest practices that could cause you to lose money.

By having access to the details of a financial advisor’s disclosures, you can make an informed decision so you can have peace of mind. It’s just like looking at a CARFAX report — having multiple owners probably isn’t a big deal. But a salvage or flood title is a major problem. It all comes down to having enough information so you can make the right decision.

AdvisorCheck+ Reports In Action: Bernie Madoff

To get an idea of what an AdvisorCheck+ report looks like, let’s take a look at the information you’ll find on one of the most notorious fraudulent financial advisors in history: Bernie Madoff. His massive Ponzi scheme is believed to have been the biggest in history, defrauding his investors out of tens of billions of dollars over several years.

Yes, Bernie Madoff is someone who you can find plenty of information about online. But the truth is, this isn’t going to be the case with the average financial advisor. Most financial advisors don’t get sentenced to 150 years in prison and $170 billion in restitution payments because of their crimes.

However, if you pick a sketchy financial advisor, the results can be just as devastating for your individual finances. We’ll be using Bernie Madoff as an example because he is so well-known, and because it’s a good way to see what you can expect from an AdvisorCheck+ report for any advisor listed in our system.

On Bernie Madoff’s main profile page, the AdvisorCheck+ report lists six categories as potential red flags, and a few areas with no known records.

Potential Red Flags

Right at the top of Bernie Madoff’s profile, you’ll see a notice that the SEC has barred him from acting as an investment advisor. That on its own is a pretty significant red flag, because it means he was found guilty of serious wrongdoing.

Fortunately, you can get more detail in the highlighted “potential red flag” categories listed in his report:

Global Sanctions — For Bernie Madoff, this information comes from the FBI, detailing their investigation against him, along with other sources. These sanctions are listed in the order of their publication, starting with the most recent publication. These are reports that you don’t get from a typical disclosure — the full text of the sanctions are readily available for you to read and make your own judgement. While Madoff’s sanctions mostly come from the FBI (because they’re the ones who arrested him), these aren’t the only potential sources for global sanctions. Sanctions from other organizations like the World Bank, the European Union and other bodies could potentially show up on an advisor’s records.

Criminal Record and Criminal Record: Uncategorized — These criminal records cover a broad range of criminal activities related to court actions against an attorney. Madoff’s crimes in these disclosures include felony wire fraud, felony frauds and swindles, money laundering, perjury and more. The full set of charges are listed from USA v Madoff to give a full understanding of what he was charged with and what the findings were against him.

Recorded as Deceased — This report shows Bernie Madoff’s death date and cause of death. Obviously, you don’t want to try to work with a deceased financial advisor! However, this is also important because some people use the identity of people who are dead for identity theft purposes. If you looked up an agent and they were reported as deceased, but someone working with their name, you could be dealing with an impersonator.

Bankruptcy — This section details Madoff’s bankruptcy filings in extensive detail, far beyond what you would find in a typical disclosure. You can learn when and where he filed for bankruptcy, and full docket entries related to the case.

Multiple Social Security Numbers (SSNs) — The AdvisorCheck+ report reveals that Bernie Madoff had several social security numbers. This is a major red flag with an advisor because it indicates identity theft or impersonation could be occurring.

No Known Records

Even when no known records are available in a specific category, you get a breakdown of where we have searched for these records. For example, Bernie Madoff had a clean sex offender record. The pull-down menu for that area reveals that there are no known state criminal, state court or motor vehicle service records related to sex offender status in all 50 states.

Madoff’s report indicates that he has no prison address on record. While Madoff did serve jail time for his crimes, his prison records were not on state records, as he served in a federal prison. Madoff also did not have OFAC listings, as he was not engaged in terrorist activities.

The total length of the report for Bernie Madoff comes out to about 31,000 words. That’s a full book’s worth of information. Obviously, not every financial advisor’s report will be that long (because they hopefully don’t have so many serious disclosures on their record), but this gives you an idea of the level of detail you can expect when any concerns are present.

With AdvisorCheck, You Get Your Financial Advisor CARFAX Equivalent

Few things are more important than your finances. Whether you’re focused on retirement planning or saving for that dream vacation, ensuring that you have a trustworthy person to guide your investing strategy is one of the biggest decisions you can make.

This shouldn’t be left to chance. Just like you wouldn’t want to get stuck with a “lemon” car, you don’t want to choose a bad financial advisor. With your free AdvisorCheck membership and our in-depth Advisor Search, you can go beyond surface-level details of any advisor you’re considering working with.

Ideally, you’d want to work with a financial advisor with a clean report — but it might not always be easy to find one. But by using an AdvisorCheck+ report to dig into the details, you can understand which potential red flags you actually need to worry about, and which aren’t such a big concern.

With that CARFAX-level report on your side, you can have confidence as you pick a financial advisor.

Written by Lucas Miller, Entrepreneur Magazine Contributor

Fact checked by Billy Quirk

Reviewed by KJ Kim

Disclosure

The information provided in this article was written by the research and analysis team at AdvisorCheck.com to help all consumers in their financial journeys, by providing the resources and the insights to help improve one’s financial health, make it through recessionary and inflationary periods of time, and save their earnings to use them towards building a secure financial future. 

Unauthorized reproduction or use of this material is strictly prohibited without prior approval. Any parties interested in content syndication, references, interviews, or PR, please contact our marketing team at marketing@aimranalytics.com

AdvisorCheck.com is an independent data and analytics company founded on the principles of helping to provide transparency, simplicity, and conflict-free information to all consumers. As an independent company providing conflict-free information, Advisorcheck.com does not participate, engage with, or receive funding from any affiliate marketing programs or services. To become a free AdvisorCheck member, visit advisorcheck.com/signup