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Securities: Tennessee Investors Shouldn’t Be Afraid to Ask Tough Questions

Thursday, May 26, 2016 | 12:03pm

NASHVILLE – When it comes to choosing a trustworthy investment adviser, the Tennessee Department of Commerce & Insurance (TDCI)’s Securities Division urges investors to first educate themselves about their advisers and never shy away from asking tough questions.

Working with an investment adviser means investors must reveal sensitive personal and financial information about themselves and their financial status. Before taking the plunge, smart investors should always ask lots of questions in order to learn as much as they can before they act.

“There’s no such thing as a stupid question when it comes to investors learning as much as they can about their advisers,” TDCI Assistant Commissioner Frank Borger-Gilligan said.  “An investment adviser’s relationship with his or her client should be transparent. If investors ever feel intimidated, they should contact us for help and to work on their behalf.”

To help investors, here are some questions they should consider asking before making an investment:

  • How are you compensated? Do you get a commission for recommending specific products? If you charge a fee for services, how is the fee calculated? Is there a cap on fees?
  • Does the investment adviser or any member of the firm act as a general partner or receive compensation from investments you recommend?
  • What is your educational background? How long have you been in the business? What did you do before you became an investment adviser?
  • What are your special areas of expertise?  Will you provide me with a list of clients I can call for references?
  • Are you a Certified Financial Planner? Do you belong to any professional organizations?
  • Have you ever been disciplined by the Securities and Exchange Commission (SEC) or any other regulatory organization such as the Financial Industry Regulatory Authority (FINRA)?
  • Are you registered as an investment adviser with the SEC or any states? If you are registered with the SEC, in which states have you submitted notice filings?
  • Who will handle my account? Will it be handled by an individual or a team?
  • Where will my funds or securities be held?
  • Will you provide a written analysis of my finances and your recommendations?
  • Do you work with other professionals, such as lawyers, accountants, broker-dealers, broker-dealer agents, and/or insurance agents? Do you pay them referral fees?
  • Once we have a plan, how often will we review its progress? How often will we meet?

Additional investor education information is available through the Tennessee Securities Division at /commerce/section/securities or at 615-741-2947.  

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