6 Signs You Are Dealing with a Terrible Financial Advisor

Choosing a financial advisor may be very hard. Some say there are limited high-quality financial advisers who you should invest time and money in. When you find an advisor that records continued returns and shifts from one profitable sector to another year after year, their advice can be too expensive. So, what do you look for in a financial advisor? Instead of seeking out the best advisor around, you can avoid the worst. What are the red flags to watch out for? Here are some signs you are dealing with a terrible financial advisor.

The advisor doesn’t discuss fees upfront.

Early on, a financial advisor should lay out a fee structure. It doesn’t have to be the topic discussed first, but it’s discussed early due to the industry not having a well-accepted standard.

There are several ways an advisor can charge a client. Make sure your advisor’s incentives are aligned with your own. Do they benefit when you benefit? Do they benefit when something else occurs? Try to avoid advisors who earn commissions for selling mutual funds, policies or other products. You want an advisor charging a flat rate. A fixed rate can be an hourly rate or a set percentage of your portfolio.

Communication issues

Are you in frequent contact with your advisor? A client should meet with their advisor on a regular basis. If you don’t, move on. Not returning phone calls or emails is simply not acceptable. There are often new developments that can affect your investments. This could be in the form of a stock’s price changing, an adjustment in a large company or acquisitions. If a client isn’t informed about this type of development, they may lose money.

Alternatively, you might find your advisor hassling you with calls too often. They could be trying to increase commissions by selling you products.

Performance Guarantees

Guarantees can’t be made in finance. Markets will continue to fluctuate unpredictably. Typically, the longer the period, the better chance they are to rise. Again, this can’t be guaranteed. Clients will ask an advisor to promise a rate of return, and some advisors will oblige. This is unprofessional and dishonest. If your advisor guarantees return, take it as a red flag.

Just as a lawyer can’t ensure the outcome of a court case, advisors can’t always pick the market. If you do encounter a performance guarantee, it will be in one of two forms. A specific rate of return or assurance of outperforming the market.

Honesty

Honesty is important for a client relationship in any industry. The relationship between you and your advisor should be no different. When an investor expresses a desire to make a financial move, an advisor should inform their client if they believe it’s and good or bad move. An advisor that doesn’t speak of potential risks, or entirely disapprove of some investments should be put on notice. The final decision is up to the client, but not warning of adverse outcomes is a disservice. A good advisor will never tell a client what they want to hear to earn fees from them.

Talking Down

There is a good chance you have hired a financial advisor because your interest or knowledge in the financial market is limited. You still want to be informed about why and how your money is being used. One aspect of an advisor’s role is to explain why they have chosen a particular course of action. They must carry out this process in a way that is understood by the client. Don’t let your financial advisor speak in a condescending manner or make you feel stupid.

Ignoring your partner

This can be the case with both male and female advisors; they either ignore the husband or wife. It generally occurs with male advisors ignoring the wife. Other times, an advisor ignores the non-primary money earner in the relationship. You don’t have to put up with this. Watch out for signs of your partner being ignored. If you feel you are being ignored, speak with your partner and let them know. A decent advisor should be aware that he or she is there to serve both spouses equally.

If you fear you’re not getting the best advice from your advisor, re-evaluate the situation before giving up. Sit down with your advisor and see if improvements can be made. After this, if they are still not suitable, then move on to another advisor. Take your time throughout the process of hiring someone new.

About the author:

Alana Downer is a blogger and a financial expert, helping both individuals and business achieve financial freedom and independence. She is also a part of the team at Learn To Trade – a trader training organisation.