Business & Real Estate

Nest Egg Briefs: A practical way to avoid crooked financial advisers

Probably everyone knows who Bernie Madoff is. Unfortunately, there are many other unscrupulous financial advisers who operate on a much smaller scale. Most have engaging and trustworthy personalities, making it difficult to be able to ascertain up front just how honest they really are. But there is publicly available data that can help you avoid the problematic ones.

Here’s an example: Mark Boucher is a financial adviser in Carlsbad. According to a recently filed complaint by the U.S. Securities and Exchange Commission, he forged checks, impersonated clients to authorize fraudulent money transfers and stole funds from his clients’ accounts to pay for personal expenses. One of his more brazen deceptions was to buy a car with money stolen from a client’s account, only to turn around a year later and sell the car back to the very same client.

The first thing Boucher’s clients should have done before engaging his services was to look him up in a public database for all U.S. brokers (brokercheckfinra.org) and registered investment advisers, or RIAs (adviserinfo.sec.gov). Because Boucher’s firm is an RIA, you can find his listing on the SEC website and click the box labeled “disclosures.”

The vast majority of financial professionals in the database have no disclosures. In Boucher’s case, there are four. It appears that he has a history of problems. The top one is the current SEC action described above. The second, occurring earlier this year, is an allegation by one of his clients that Boucher stole more than $500,000. We also find that Boucher had been fired by his previous employer in 2019 for misappropriating client funds.

The other useful information in this section is the adviser’s experience. In Boucher’s case, he has been in the profession for 28 years but has changed firms numerous times, twice after only one year or less. While that’s not illegal, anyone considering hiring him should at least investigate why he flitted around so much.

Asset protection

Another factor to consider before hiring an adviser is how your money will be protected. If you go back to the first screen and scroll down to the “Previous Registration(s)” section, you’ll see the name of Boucher’s firm – Strategic Wealth Advisors Group Services. Click the name, then “View Latest ADV Form Filed.” This is a form regulators require that all RIAs submit at least once a year. It includes information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations and any disciplinary actions.

The most valuable section for this purpose is “Section 5.K.(3) – Custodians for Separately Managed Accounts.” Here the RIA must report the names of the custodian firms that hold at least 10% of the RIA’s clients’ cash and investments. Legitimate RIAs use large independent institutional custodians such as Charles Schwab & Co. or Pershing LLC. These are companies that maintain trillions of dollars worth of client accounts and enforce strong protections against advisers illegally siphoning out money. In Boucher’s case, no information was filed. Either he made a mistake on the form or he is holding his clients’ money in a way that might put them more at risk for theft or fraud. In any case, it’s another red flag.

Before choosing to work with an adviser, you should at the very least use this public information to screen out potentially deceitful ones. It may take a bit of effort, but the cost of making a mistake can be high.

Los Altos resident Artie Green is a Certified Financial Planner and principal at Cognizant Wealth Advisors. For more information, email This email address is being protected from spambots. You need JavaScript enabled to view it. or visit cognizantwealth.com.

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