At AdvisorCheck, we believe in empowering you with information so you can confidently choose the right financial advisor. One important aspect of this is understanding advisor disclosures or potential red flags.
What are Disclosures?
A disclosure is a reportable occurrence, or specific event related to an advisor or their firm that’s included in an advisor’s regulatory record. Some events may be procedural, while others may indicate regulatory concerns. Some examples include customer disputes, regulatory actions (such as fines), bankruptcies, employer terminations, judgments, or even certain criminal activities.
It's important to remember that a disclosure isn't always a negative reflection on the advisor, and it might not even be their fault. They are simply events related to an advisor and their firm that must be formally included in an advisor's record. We encourage users to review full disclosure details before making judgments.
Disclosures as Potential Red Flags
Disclosures could be a potential red flag or warning sign. A single, isolated event might not be a cause for concern. However, repeated offenses, or certain serious events, could indicate a pattern or potential problem. For example, several similar customer complaints might suggest a lack of transparency or issues with how the advisor handles client expectations. Sanctions, like suspensions or fines, could signal a failure to follow industry rules.
What To Do If an Advisor Has a Disclosure
If you see a disclosure on an advisor's profile, don't panic! Here's what we recommend:
Do your Research: Take some time to review the disclosure records on AdvisorCheck.
Discuss it with the Advisor: The best course of action may be to go straight to the source and ask the advisor about it directly.
Consider the Context: Understand the nature of the disclosure, how it was resolved, and how the advisor has addressed the issue since then.
Make an Informed Decision: Ultimately, it's up to you to decide if you're comfortable working with the advisor, knowing all the facts.