Just like any other business minded person, financial (investment) advisors and planners are in it for the money – they have to make a living, and they’re doing it on your dime. Don’t ever doubt that they are terrific salespeople as well as financial advisors.
So, taking their word as gospel would not be advisable. Yes, there are some good ones out there that genuinely care about your portfolio, retirement account and helping you to make some money – there are just as many, if not more, that will tell you just about anything as long as your money is making them a good living.
It is highly recommended that you look into their advice before taking it – as well as working with more than one advisor or planner. Take what you get from each, and run with the most logical or researched information you get. Never just count on one person to do your investing, especially if you’re not sure of the landscape.
Here are some things you should watch out for with regards to your financial advisor
Unfamiliar with your financial situation
For an investment broker or financial advisor to be successful with your money, they first must know all there is to know about your finances. It is their job. They should be helping to evaluate, and plan out your financial future – as well as have a background in finances, so that they have the knowledge to invest your money wisely, based on your cash flow and expectations.
Most financial advisors or investment advisors don’t just make money on the fees they charge for your transactions and for their services. They make commissions on your money. They make commissions and bonuses on the sales they make, and those sales are with your money.
Many professionals in the financial world will not disclose that they are not certified. Some just came out of the insurance business, or were successful in investing for themselves and decided to jump into financial advising for others without the training necessary to be effective or efficient. Make sure you find someone that you trust your money. Know for certain they are trained and certified before working with them.
They pass your financial plan to ghostwriters
This is the biggest hidden fact in all of financial advising and planning. People who are trying to learn the business – secretaries, assistants, etc., do most of the work on your portfolio. You may feel completely comfortable with the investment planner you just signed up with, but little do you know, his work is finished. He signed you up and is basically a glorified salesman.
Most of the work will be outsourced to a secondary firm, or even freelancers.
The biggest problem is that your financial future isn’t really in his hands as promised and this is one of the most corrupt acts of financial and investment planners/advisors.
Malpractice is going to be difficult
With the loose structure and regulation of the financial industry, proving someone cheated you can be extremely difficult. Even if the person you have been working with holds a securities license. And if you’ve lost less than $30 grand, it really isn’t even worth filing a claim. Most arbitration costs somewhere between $15 and $25 grand, so you’ve eaten up your losses just in arbitration.
If you have lost less than $30 grand, you will have to start writing letters to even get the advisor disciplined.
To make sure this doesn’t happen to you, do a thorough check on the financial planner or investment advisor’s record and reputation. You can check on the SEC (Securities Exchange Commission) website to view previous complaints and violations.
And by all means, don’t leave that investment advisors office unless you are completely clear about what that person is doing with your money. Confusion is not an option, no matter how frustrated or busy that advisor appears. It is your hard earned cash and if that advisor has to explain it 20 times, then so be it.
Trust no one – do your research on each and every action and investment and be part of the process. This will save you lots of frustration down the road. And when an investment advisor tells you that the plan is bulletproof and can’t lose – run. Those are the words Madoff used.
This was a guest post by Kristy Ramirez, a frugal, debt-free mom who navigates her life striving to live financially sound and stress free.