Can you trust your Advisor
Here are 11 red flags to watch for
As an investor, it is essential to have a financial advisor you can trust. They can help you make smart investment decisions and guide you to reach your financial goals. However, not all financial advisors have your best interests in mind. Unfortunately, some may be doing things that are not in your best interest, costing you money instead of helping you earn it.
To help you spot the warning signs of a bad advisor, we’ve compiled a list of 11 red flags that may indicate your financial advisor is taking advantage of you.
Your financial advisor doesn’t explain how they get paid. If your financial advisor hasn’t clearly explained how they’re being paid, it’s a warning sign. Advisors may get paid through commissions, fees, or both. Understanding their compensation structure can help you understand if they have any conflicts of interest when making investment recommendations.
Your financial advisor doesn’t care about your needs and goals. If your advisor hasn’t taken the time to understand your financial goals and needs, it's time to look elsewhere. Your advisor should develop a personalized plan to help you achieve your objectives.
Your financial advisor boasts they can “easily” beat the market. No advisor can guarantee you returns that consistently beat the market. If your advisor is claiming otherwise, they may be overstating their abilities or not being honest with you.
You only hear from your financial advisor once a year or less. Your advisor should be available for regular check-ins to ensure that you’re on track to meet your financial goals.
You’re only invested in high-fee “closet index funds.” If your advisor is charging you high fees for a mutual fund that is similar to an index fund, it may be time to look elsewhere. These high fees can add up and cost you a lot of money in the long run.
Every time you talk to your financial advisor, they ask you to buy something. If your advisor is highly incentivized to sell you investments to earn commissions, it may be time to look for someone more interested in helping you achieve your long-term financial goals.
Your advisor doesn't educate you on investment risks. Your advisor should educate you on the risks associated with investing and not just promise high returns. If your advisor is only telling you about the potential upside without talking about the risks involved, it could be a warning sign.
Your advisor is recommending investments that are not aligned with your goals Your advisor should be recommending investments that align with your financial goals, not just trying to push certain products or investments.
Your advisor isn't registered with regulatory bodies. Ensure your advisor is registered with regulatory bodies like the SEC or FINRA. This helps ensure they meet specific ethical and professional standards.
You don't understand your investment portfolio. Your advisor should explain your portfolio in a way that you can understand. If you don't understand your investments or your portfolio's performance, it's a sign that your advisor may not be transparent enough.
Your advisor is making decisions without your input. Your advisor should involve you in the decision-making process and explain their rationale. If they're making decisions without consulting you, it may be time to find a new advisor.
In conclusion, be wary of advisors who exhibit any of the warning signs listed above. Remember, your financial advisor should be working with you to achieve your long-term financial goals.
If you suspect that your investment advisor might be doing things that are not in your best interests, it’s time to book an appointment with one of our hourly planners to get a second opinion.
