Reasons You Should Consider Moving On
Starting to doubt your financial advisor? Too often people hand money to an advisor without a shred of research. Here are ten warning signs that you possibly need to move on.
It’s when your advisor:
- Still doesn’t know your needs. Suppose your doctor recommended surgery before even making a diagnosis? If your advisor doesn’t learn your complete story, how can he or she possibly make a proper recommendation regarding your money?
- Doesn’t reveal how he or she is paid. Advisors make money in many different ways: commissions, straight fees, fee-based or a combination of the three. Asking how your advisor charges helps you know exactly what you pay throughout the working relationship. If you don’t understand the explanation, have your advisor put it in writing.
- Makes you feel rushed. If you sense you are on the receiving end of a rapid-fire Boiler Room pitch for investments, you need to run – fast. When investing for your retirement, assets must meet your needs as much as possible. Never feel pressured to act now or else.
- Wants everything in one investment or with one firm. The adage about all your eggs in one basket has a lot of merit. If your advisor is adamant about putting all your money into one investment or with one firm, be wary. Diversification is a basic and fundamental principle of any portfolio.
- Doesn’t inform you of changes. If watching CNBC is consistently the only way you learn about abrupt shifts in your holdings, make sure your advisor is on top of your investments and lets you know exactly how.
- Has no legitimate statements and reports. Your advisor ought to send you a monthly statement summarizing all transactions, including deposits, withdrawals and current positions held.
At a minimum, quarterly and annual reports from your advisor need to detail return on your investments, as well as all fees and commissions. These reports need to show all the realized gains or losses (money you actually made or lost from selling an investment), unrealized gains and losses (investments you own but have not yet sold) and returns of the market benchmarking indexes, such as the Standard & Poor’s 500.
- Wants a direct check. The ultimate warning sign: Never, ever write a check directly to the advisor, especially if you are purchasing some kind of investment product. Every check must be payable to an institution, such as the custodian or the advising firm.
- Doesn’t know your risk tolerance. Imagine you’re comfortable with a portfolio that acts like someone driving 55 mph while your advisor invests you more like someone trying to win a NASCAR championship. See a problem?
- Fails to return calls or emails. Or worse, routinely asks someone else to return his/her calls.
- It just doesn’t feel right. Trust your instincts. They are there for a reason.