How To Recognize If You Should Be Making A Change
It’s a nightmare scenario for any investor. You stash away your money and assume it’s being managed properly, only to find out later that a huge chunk of it has been lost to commissions, fees, and bad investments from your financial advisor. Sadly, this happens far too often, decimating the retirement funds and futures of the victims.
At Regal Assets, our team of experts has decades of experience in the financial sector. We’ve seen it all, both the good and the bad, and have learned a great deal of valuable lessons as a result. By knowing what to look for ahead of time, you’ll be ahead of the game and in a position to protect and grow your wealth when working with your financial advisor.
Whether you currently have one and are wondering if they’re actually the best option for managing your assets, or if you are thinking about hiring a financial advisor for the first time and want to know what to look for, our list of red flags will tell you exactly what you need to know and avoid.
Lack of Transparency
Financial advisors should be generally be open and honest with you. It is a partnership between them and yourself, after all. This transparency should include their fees structure and how they are compensated. Some charge a flat fee per service, some an hourly fee based on how much time they spend with your portofolio, or some take a percentage of your total assets. Others, and these are the ones you should stay away from, get a commission every time they sell a certain product.
Regardless, they should tell you exactly how they’re paid. Don’t be afraid to ask questions if you don’t understand something, either. If they won’t answer or try to give you the runaround, then look elsewhere. Mike Jurs, director at Financial Engines, a San Francisco-based independent financial advisory service says “Don’t worry — you’re not being rude, it’s almost expected. After all, it’s your money and you should be sure that your advisor has your best interests at heart.”
Transparency should also extend to documentation regarding your investments. You should receive some sort of written pledge that states they will disclose any sort of conflicts of interest. They should also send you monthly statements summarizing deposits, withdrawals, and currently held positions. It should come from your brokerage firm or custodian, not your advisor’s office (some of the most common custodians include Fidelity, Charles Schwab, TD Ameritrade).
They Always Agree With You
A people pleaser does not make for an ideal financial advisor. If you’re finding that they always agree with you no matter what you say, then that’s a huge red flag. You should be hiring a financial advisor for their financial expertise and advice. They shouldn’t be afraid to challenge what you say while explaining why their viewpoint differs from yours.
Even if they do agree, they shouldn’t do it immediately and without any thought. They should think about and consider what you say and give details that support their response. If they just blindly say “yes”, then they aren’t keeping your needs in mind. It’s essentially as bad if they ignored you altogether.
No Credentials
Certified Financial Planners and Investment advisors must adhere to specified standards and be aware of the relevant regulations. They should also have the proper credentials and subsequently passed the appropriate tests to receive CFP certification. Make sure to ask your prospective advisor if they have these qualifications. You can always call the Certified Financial Planner Board of Standards to verify, as well.
If an advisor has trouble explaining basic concepts to you, or if they always seem to need to get back to you later with answers, then it could possibly be a sign that their knowledge isn’t up to snuff and they are missing key qualifications. The certification process for financial planners requires them to demonstrate their knowledge and pass a rigorous exam requiring an enormous amount of study, so they should know their stuff inside and out before bringing on clients.
They Ask For a Check Made Out Directly To Them
We are getting into straight up “scam” territory, here. This should be considered the ultimate warning sign. If they ask you to write them a personal check, never ever do it.
A financial advisor was just recently accused of doing just this in Texas. He had actually been an advisor in his town for many years and had built a solid reputation for himself. But then the time came when he began exploiting his elderly clients. He told them he was selling annuities. They trusted him and considered him a friend, so they wrote him a check made out directly to him. Guess what? He disappeared soon after, swindling his clients out of hundreds of thousands of dollars.
If you’re writing a check at any point, make sure it is to be payable to an institution, not an individual.
They Don’t Have Time For You
Your financial advisor should be client-focused, which means that the client is their top priority. This should include a clear line of communication with timely and professional responses. If your advisor doesn’t make you feel like your a priority, then you should think about switching. Your finances should be their top priority, since it’s literally their job.
They also shouldn’t be too busy to meet. Many advisors only meet with their client’s once a year to discuss their portfolios. If you’re a hands-off investor and are comfortable with the state of your assets, then this might be fine. But many people want to keep a closer tab on their wealth, and to that end you should go with an advisor that’s willing to meet more often.
When your deciding on an advisor, ask them about how frequently you can meet, and whether or not they’re ok with phone calls or emails in the meantime. You may have a question or a problem, or maybe you just want to change your investment strategy. By having a responsive advisor, you won’t have to wait weeks or months until your next meeting.
No matter what, they should still have the time for a return email or call, even if they can’t necessarily meet right away. Pedro M. Silva, a financial advisor at Provo Financial Services, in Shrewsbury, Ma., says “Depending on the size of the account and how the advisor has scaled his or her practice, clients might not be contacted as often as they would like, but a return call or email should be a basic courtesy in any industry.”
Inflated Ego
The vast majority of those seeking a financial advisor do not work in the finance industry. It makes sense. If you already knew all about investing then you wouldn’t need help. This means that, especially when starting out, clients will often have a bunch of questions for their advisor.
How your advisor responds will tell you everything you need to know about them. One that doesn’t like or encourage questions should be avoided. Even worse is an advisor that gets aggressive when you challenge them. A good advisor should always listen to what you have to say and come back with a clear explanation in a respectful manner.
Likewise, a financial advisor shouldn’t make excuses when things aren’t going well. You want an advisor that takes responsibility for mistakes, and is open and honest about why they did what they did. No one is perfect, but if they’re making decisions with sound logic and your best interests in mind, then that’s what you ultimately want.
They Talk At You, Not With You
Your financial advisor and yourself should have a healthy relationship with one another. They are there to work with you and give you advice, not take control. It’s your money, after all. The way to do this is to maintain clear two-way communication with your advisor.
If your advisor avoids conversation, tries to steer the discussion in their own direction, or uses a ton of buzzwords and jargon, then you should be concerned.
It’s also a worrying sign if your advisor talks down to you. If you aren’t a financial professional (which is most likely the case), then it’s perfectly OK to not be familiar with certain terms or products. It’s the advisor’s job to explain the details to you and help you understand it. If they can’t or won’t do this, then they aren’t going to be very helpful to you.
At Regal Assets we believe in providing you with trusted and proven investment options. We take pride in the way we do business and have enjoyed helping our clients make the most of their money for over a decade. Our expert team members will work side-by-side with you every step of the way, so you can be sure that your assets are both protected and in a position to grow.
See for yourself what we can offer with our FREE Investor’s Kit. It explains Regal’s IRS-approved investment options and how they work. We’ll help you choose a strategy that’s right for you, so you can achieve your goals.
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