Reading a brokerage statement might not qualify as one of life's more exciting experiences, but it's critical to smart money management. If you don’t read and understand your brokerage statement, you might not spot mistakes or even outright fraud that can be hidden in plain sight.
So give each brokerage statement a thorough read. If anything looks awry, don't be shy about calling your financial professional to request an explanation or, if necessary, reaching out to regulators such as FINRA that oversee the brokerage industry.
Here's a top-to-bottom look at the information a brokerage statement might include and what to keep in mind when checking for errors or signs of fraud:
Statement Period or End Date
Your statement should show the value of your investments at the end of the statement period. Knowing that end date can help you gauge your investments’ performance over a certain time period. Statement end dates should follow a consistent pattern, such as the last Friday of every month).
This information on your statement identifies ownership of the account (individual, joint, etc.), as well as what type of account it is (personal, business, etc.) and account number(s). It also identifies the current mailing address the firm has on its records. Be sure the account number matches your previous statements and that all account ownership information, including your address, is correct.
The name and contact information for your financial professional are generally located at the top of your statement. Statements from online brokerages or other investment firms that don’t provide investment advice might not include the name of a specific finance professional. But they’re still required to provide a valid phone number that you can call for information on your account.
The clearing firm identified on your statement is the brokerage firm that maintains custody of the securities and cash in your account. Account statements must provide clearing firm contact information. The clearing firm may be a subsidiary of your brokerage firm, and thus have a name similar to your brokerage firm, or your firm may have an arrangement with another broker-dealer to act as its clearing firm.
If you notice any inaccuracies or discrepancies on your account statement, report—in writing—the issue to both your primary brokerage firm and the clearing firm listed on your statement.
The account summary shows the big picture of your account’s performance, including the total value of your account and the performance since the last statement period. It can give you important insight into how successful your investment strategy is and whether you should change course.
Always review your account summary and report any unauthorized activity. Also be wary of consistent, positive returns that seem unrealistic.
This section helps you stay in tune with the income earned and its source and may be consolidated with your account summary, deposits, withdrawals, dividend interest and bond maturity dates. Remember that actual yields or total investment returns can differ from estimated annual income (EAI) or estimated yield (EY), which, as the name suggests, is only an estimate and may change.
Raise concerns about unfamiliar sources of dividend and interest income or if you see income that appears on your statement but hasn’t been deposited to your account.
This is where fees associated with your account are disclosed. It isn’t possible to get a clear picture of your investment results without an accurate understanding of your fees, so you’ll want to review this section of your statement carefully and be alert to any unexpected charges. Don’t be afraid to ask about fees, including commissions, that seem excessive or unusual or if you see unanticipated handling charges or other costs.
This section should include detailed information about account activity during the period, including any trades made and money going out or in. Check the details for accuracy, including deposits and withdrawals, and be sure the activity matches the trade confirmations you've received in the past, including the price at which you bought or sold a security and the quantity of shares bought or sold.
A margin is a loan from your brokerage firm that’s secured by the securities you’ve purchased. Your statement will tell you which securities, if any, you’ve purchased this way, and margin interest charges show how much interest you’ve paid on this loan in a given account period.
Ask for an explanation of any margin costs that exceed the disclosed rate of interest or securities purchased on margin without your permission.
This information might show the individual assets in your account and include a breakdown of investments by asset class. From here, you can assess whether the list of holdings is accurate and get a sense of how diversified your portfolio is, which can help you evaluate whether your investments are in line with your goals and risk tolerance. The portfolio detail section might also include other information like bond insurance ratings, unrealized gains and losses, and income from investments.
Disclosures and Definitions
From explanations about fees to key definitions, this section is designed to help you understand your statement. It’s also where you’ll find details about key legal information. Note that any fees disclosed here should match those being charged in the account.
Tying It Together: Appearance Test
One of the biggest red flags, particularly when it comes to scammers issuing fraudulent statements, is a statement that looks unprofessional or altered in any way. For instance, logos might have an oddly low resolution or fonts may be inconsistent. In some cases, scammers have been known to include legitimate firm logos on their own trumped-up statements.
If you find inaccuracies or discrepancies in any of your statements, contact your financial professional or brokerage firm as soon as possible. If they can't resolve the problem, consider filing a complaint using FINRA's online Complaint Center. The FINRA Securities Helpline for Seniors is also a good resource at 844-57-HELPS (844-574-3577).
You may not like reading financial documents, but when it comes to your brokerage statements, ignorance is not bliss.