Can financial advisors steal your money?

Yes, an unscrupulous financial advisor can steal from you, so it's important that you take the time to hire a fiduciary advisor you can trust. Most reputable financial advisors never take possession of your money. Giving them direct access makes it easier for them to steal funds. Avoid doing so unless you're 100% sure you can trust the person you work with.

Certainly, the financial advisor who steals money from a client should be held legally responsible. However, your member firm shares the same responsibility for fraud. In many cases, theft of financial advisors could have been prevented if only the investment firm had adequately supervised the representative. Most stockbrokers and financial advisors would rather remove their tonsils with a rusty spoon than steal your money.

But there are some bad apples out there. In fact, they're plotting how to put their greasy paws in your treasure right now. Let's see what you can do to ensure your investments are safe. Have you ever read about “advisors who sell someone else's house and keep the money? They do it by getting a power of attorney from the unsuspecting customer and then using it very mischievously.

This is how they do it. When you give a broad power of attorney to an advisor, you are giving that person the legal capacity to treat their assets as if they were their own. That includes buying and selling his assets and then moving the profits to whatever account he chooses. If they decide to move their money into their own account, they can do so.

Of course this is illegal, but catching them after the fact is difficult and often ineffective. Usually, the damage has already been done. When that trust is broken by a bad or negligent act, the investor suffers and the financial advisor must be held accountable. Also use the SEC's Investment Advisor Public Disclosure website to search for advisors and verify any history of disclosures.

Because of this, a large majority of reputable financial advisors never appropriate their money to protect their best financial interests. The best way to prevent a financial advisor from stealing your money is to avoid giving you access to your funds and keep your personal information private. Becoming a victim is not only frustrating and emotionally distressing, but it can also be financially devastating. This is the highest legal standard of care and requires financial advisors to act in the best interest of their clients, make appropriate investments, and disclose relevant information to you.

As a general rule, your lawyer can start by helping you raise the issue with your financial advisor's company compliance department. Your lawyer can determine if informal negotiation, FINRA mediation, FINRA arbitration, or securities litigation is the best way to obtain a full financial recovery. In most cases of financial advisor misconduct, investors must seek compensation through the FINRA arbitration process, rather than through securities litigation. If you've been the victim of the theft of a financial advisor, it's normal for you to feel stressed and overwhelmed by your situation.

You may also consider writing checks directly to your qualified third-party custodian and limiting the amount of personal information you share with your advisor. Financial advisors are highly trusted professionals who help you make decisions that impact your economic future. However, they may indicate that your advisor is operating less transparently than others, that it does not take into account your interests, or that they are in fact taking advantage of you.

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