March 22, 2009: Is your Financial Advisor in New York safe? How to do a background check.

Many people, both individuals and institutional investors, were burned by Bernie Madoff. So how do you know if your New York financial advisor is safe? And how do you find your broker or investment advisor's compliance history and background check? Unfortunately, no amount of due diligence on your advisor is 100% fail-proof, but there are several things everyone should do to check their wealth manager and minimize the risks.

The first rule is simply one of the oldest in the books: If it sounds too good to be true, then it probably is. This rule did, in fact, save many people from Madoff. They couldn't figure out how he was earning his returns and therefore, didn't invest with him. If an investment advisor seems to be promising something better than everyone else, remember that there's no monopoly on investments, and no financial advisor is likely to have any legal secrets that give them a significant advantage on investment performance. In fact, you may want to periodically contact another advisor for a second opinion on your investments. If you are interviewing for a new financial advisor in New York, interview at least two or three. Ask each financial planner about the recommendations and strategies of other advisors and judge the investments and responses yourself.

Another basic rule is to make sure that your investment account is held at a reputable firm, even if an independent investment advisor like Madoff is managing the account. Most independent financial advisors use firms like Schwab or Fidelity to actually hold their customers' securities and accounts. Major firms like this are also part of the SIPC, or Securities Investors Protection Corporation. This means that your investment account is covered up to $500,000, but unfortunately, only if the firm goes insolvent. The SIPC insurance does not cover your account due to fraud or broker theft of your money.

The following article provides the links to check the compliance record of financial advisors with various government agencies:

How to do a Background Check on your Broker, Financial Planner or Investment Advisor