Many people use a financial advisor to handle their investment accounts. They don’t have the time or the experience to invest on their own and having a professional involved is often a good idea. But not all financial advisors play by the rules and too many of their customers have been scammed. An investor should learn what the signs are that their financial advisor may not be doing what he’s supposed to be doing.
- They insist on acting immediately. If a financial advisor uses pressure or fear to get their client to make a quick decision, they may not have their client’s best interests at heart.
- Guaranteed high returns. If a financial advisor is guaranteeing high returns it can be a warning sign. No one has a foolproof crystal ball and a good financial advisor will advise their client that returns are not guaranteed.
- Telling clients “they can’t lose”. If it sounds too good to be true it probably is. There are always ways to lose on investments.
- Everybody is doing it. If a financial advisor tells their client that the investment made “hundreds of people wealthy” it can be a red flag. Scammers need to have their client’s trust them and this is one way they do this.
- You’re lucky for the opportunity. If an advisor tells their client they are getting in on the ground floor of the next big opportunity it can be a scam.
Tips on hiring a good financial planner include:
- Paying an advisor a flat rate instead of commissions on the products he sells to his client.
- Checking the Investment Adviser Public Disclosure database.
- Hire a financial advisor who is also a fiduciary
If a person believes their financial advisor may not be doing their job they may want to speak with an attorney who specializes in broker misconduct. An attorney can help their client recoup their losses and bring bad brokers to justice.