Do I Have a Good Financial Advisor?

Many consumers often wonder if their financial advisor, or professional who renders financial services, is doing their job right.  Are they really working for you? Are they doing what’s in your best interest?  Well, if you think your financial advisor is giving you retirement investment advice that’s in your best interest, you could be sadly mistaken.

What you may not know is that many financial professionals aren’t required to put their clients’ best interests first because they’re not bound to a fiduciary standard (a legal requirement to act in the investor’s best interest). So the financial advisors you trust may actually be motivated more by the commissions they get from steering you into certain investment selections rather than by considering what may be the best choice for your individual circumstances. So how do you know whether he/she is a good advisor?

Many people have only had experience with one financial advisor.  Sometimes they stay with that advisor because they don’t see anything wrong, and other times it’s because they don’t want to ruffle any feathers, even though deep down they might have some reservations.  It is your money, and you deserve great advice from a great advisor.

The following are some warning signs that might tip you off to shop around for a new advisor, or avoid the one you are interviewing. Let’s take a look:

·        The last place you want to hear about your investment doing very poorly is from the news or a neighbor.  If you are not informed of drastic changes in your investments, then that is a sign of a bad financial advisor.  A great advisor will communicate substantial changes to you immediately after they find out about it.

·        Are the checks payable to him or her? If so, it could point to an advisor that cheats the broker-dealer or investment advisory firm he or she may work for.  Any checks that you give to the advisor must be made out in the name of the broker-dealer or investment advisory firm.

·        You should receive monthly statements from broker-dealers.  If your money is held at the broker-dealer directly, you should receive statements every month.  Those statements should reflect positions held, dividends paid and reinvested, and fees.  If you are getting statements only from your advisor’s office, there might be a problem.

·        Does your advisor know you, personally?  They should.  It is part of our Patriot Act requirements to find out what your situation is to see whether the investment is “suitable” for you.  If you are a senior with $20,000 in credit-card debt, it might not make sense to invest the senior’s last $20,000 in stocks, for example.  Registered investment advisors have an ongoing fiduciary responsibility, so search to make sure they are registered.  If I were looking for a great advisor, I would ask whether they are a registered investment advisor representative.  Those advisors have a fiduciary responsibility that sets them apart from other financial advisers. They often charge fees instead of commissions so they have to earn your respect every quarter instead of getting paid a great big check up front.

·        Do they have all your eggs in one basket?  Many times, a person invests all their money in one investment. One common abuse is annuities. If a person has $100,000 total, it might not be a good idea to invest all of it into an annuity. If that person needed $20,000 quickly for an emergency, there could be substantial surrender charges from the annuity upon withdrawal.

·        Are you clear on how the advisor is paid? People do not work for free. You need to ask whether they are paid by commission, fees, or both. Some fees and commissions can vary as much as 200 percent from firm to firm. If you do not know what the average cost is for the service, ask so you can compare.

·        If you feel pressured to buy the advisor’s recommendation right now, there might be a problem. Most investments can be bought the next day, although some have limited quantities. Trust your heart when somebody says you need to buy it now. We call these people pushy.

Over everything else, you may check on an advisor’s record by going to for a broker check. The search tool is sensitive, so make sure you have the correct name. That will allow you to review an advisor’s major disciplinary issues.  Good hunting!



One thought on “Do I Have a Good Financial Advisor?

  1. I’m just starting to look for a financial advisor (viet vet) for my father, so this is great information at a perfect time.

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