Are You Getting Bad Financial Advice?

When we think about our inner circle, we think of who we can trust. Your significant other, children, parents, siblings, best friends, dog. In making this list, you probably overlooked the fact that one of the most significant relationships you’ll have in your life is with the person you turn to for financial advice. It’s a big deal to let someone into the inner circle, so it’s up to you to make 100% sure he or she is looking out for what’s best for you. Here are a few ways you can tell if your advisor is being a bit sleazy and giving you bad financial advice. Read the article to determine if you are you getting bad financial advice.

are you getting bad financial advice

 

Your advisor tries to sell skills like used cars

If your advisor is promising you unreasonably high rates of returns, be on edge. The markets can be very temperamental and in many cases, driven on emotions–not data. Be sure to look for an advisor who will be honest and realistic with you about potential risks and returns. There are no guarantees in investing, so don’t let your advisor give you false hope.

 

Your advisor isn’t a registered investment advisor (RIA)

A very quick history lesson: The Investment Advisors Act of 1940 explicitly requires advisors to always act in the best interest of their clients. The scary thing is that the typical stock broker or large wirehouse (multi-branch firm) financial advisors are exempt from the fiduciary standards of this act. In other words, they never pledged to do what’s best for you. Many times, these stock brokers or advisors who represent large firms are glorified salespeople hired to push their firm’s proprietary funds (which are loaded with high fees and commissions). Note: there’s nothing necessarily wrong with these professionals and the jobs they do, but since they’re held to much looser standards, they probably don’t belong in the inner circle we talked about. On the other hand, Registered investment Advisors (RIA) are registered directly with the Securities and Exchange Commission (SEC) and are required by law to act in the highest fiduciary standards. Translation: they have to act in your best interest and they have to disclose all relevant and hidden fees.

 

Your advisor gets uncomfortable when asked how he or she is paid

You have every right to know the answer to this question! If your advisor reacts strangely, there’s probably something you’re not being told. In general, if your advisor acts squirrely, move on. You don’t have time for this kind of weirdness. Remember, an RIA must disclose all information pertaining to compensation. If your advisor is paid solely on commission, then be aware that he/she has to sell you something to make money. Your advisor should be managing your finances, not constantly pushing you into new products and services.

 

Your advisor never returns calls

Rude. And an indication that he/she is somehow too busy for you. If this advisor can’t even take five minutes to focus on your needs, how much time do you think is being spent monitoring your retirement portfolio? In the words of the famed early 2000s MTV show: “NEXT!”

 

Your advisor always talks over you and never listens to your concerns

Your advisor should always show you respect. There’s a big difference between being a subject matter expert and an intellectual snob. A good advisor will educate and explain concepts, but never talk down to you. Additionally, if you and your significant other consult an advisor as a couple, both partners should be treated as having equal say in any financial decisions. For example: ladies, if the advisor directs his/her attention only to the man, run, don’t walk out of there.

 

The person you look to for financial advice needs to not only be someone knowledgeable and honest, but most importantly, someone you like and trust. Remember, you’re choosing a member of the inner circle; it’s a coveted position. Be picky! If you’re not confident that this advisor will look out for your financial well-being, it’s time to take your business elsewhere. Take control of your financial future by finding an advisor who really wants to get to know you and help you achieve your specific goals.

 

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