New Check Writing Policy Protects Your Money
You may have noticed that when you want to make an investment, you typically send a check to your financial advisor, who processes the transaction on your behalf. Whenever you send a check, make sure it’s written directly to the product sponsor (such as the mutual fund or annuity company where you’re investing) or to the brokerage firm that’s holding your investments for you (such as Royal Alliance or Pershing).
As financial advisors become more popular with consumers, the dollars under their management have grown accordingly. The good news is that more people are better prepared financially than ever before. The bad news is that opportunities for abuse have grown as well.
To reduce the threat of criminal activity, government and industry regulators have instituted a variety of safeguards. That’s why cash purchases and deposits over $10,000 must be reported to the IRS (because organized crime often deals with cash). This also explains why your investment checks are being scrutinized more than ever.
For your protection and their own, many brokerage firms and their clearing agents have instituted strict guidelines for accepting checks from their clients. In our own financial planning practice at Apex Consolidated Financial Services, we too must follow these safeguards. As a result, your check can be accepted by your advisor or his firm only if:
If the Payment is Consideration for a service rendered or is for a specific investment. The check is drawn against a U.S. financial institution, in U.S.dollars. The check is made payable to the appropriate fund or annuity, or to your brokerage account. It is not a third party check. If you wish to invest a check you received from someone else, you must deposit that check into your own checking account and write a new check made payable directly to the appropriate fund or annuity, or to your brokerage account. The maker of the check matches the title on the investment account. (This can cause problems when a woman marries and changes her name but not her checks !) Advisors can't accept cash, money orders, travelers checks, and double endorsed checks, cashiers checks under $10,000 or other non-tracable financial instruments under any circumstances.
It’s not uncommon for investors to feel they are being punished because of all these restrictions. But it’s important to remember that these rules were created to protect your investments from fraud or theft.
Therefore, before you send a check to your mutual fund, brokerage account or financial advisor, call first to make sure that what you’re sending is in an acceptable form. This can save you a lot of time and aggravation. For more information, contact your advisor.