So you’ve Interviewed Financial Advisers and you thought you found a winner, but after some a few months you are starting to become suspicious of your financial planner’s ability or intentions. Don’t be afraid to fire your financial planer, especially if he or she is engaging in any of the following activities:
Lack of Communication: Financial advisers should be in touch with you in good times and bad. If you are trying to reach your planner to discuss your portfolio during these rocky times in the stock market, and you can’t get a call back, that is not a good sign. Chances are he or she does not have an answer for you or is not confident in how to protect you from the downside.
Churn: If your financial planner is recommending excessive trading and moving you in and out of stocks or mutual funds, get rid of him or her. Chances are they are working with their commission check in mind, not your portfolio performance.
Unusual Offers: If your adviser is pushing stocks or funds with very low trading volume, low float (or a small number of shares on the market), or stocks that are extremely cheap, it’s a good time to start asking questions. Chances are they have the brokerage firm’s interest in mind, not yours. According to Investopedia.com:
Brokerage firms sometimes hold positions in certain stocks or bonds that may not be of the highest quality. They know that they can’t dump them on the open market, or the selling pressure will collapse the security’s price. Instead, they often offer incentives, such as higher payouts, to their brokers to push these stocks or bonds to their clients over time.
Poor Performance: While your investments need to be looked at a long-term perspective, the performance of your financial planner should be in-line with the performance of the overall market. While from time to time your portfolio may under perform when compared to the S&P 500 or the Dow Jones Industrial Average, this should not be consistent and your adviser should have a sound explanation.
Dishonesty: If you find out your financial adviser lied or stretched the truth, do not work with them. While something as major as lying about their credentials or how they are paid should be reported, minor inconsistencies should also arouse suspicion. They should also be able to take responsibility for their performance. You can’t win all of the time, but you should have the ability to admit a mistake when one is made.
Incomplete Analysis: Most financial planners are specialized in certain areas and have strengths in particular investments. Be wary of those who are only looking at that specific area of your portfolio rather than the whole. This can increase your risks as diversification is minimized.
To do a quick background check on your financial planner, visit www.brokercheck.finra.org to see if any disciplinary actions or complaints have been filed. Be sure to also verify they are actually a certified financial planner by visiting www.cfpboard.org/search.
Millionaire Money Habit: Your money is your early retirement. Don’t be afraid to have high expectations of your financial adviser and fire them when things are not going the way you planned. There are plenty of fantastic advisers who will do a better job managing your finances and investments. -RT
