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Potential Financial Advisor Red Flags

Potential Financial Advisor Red Flags

Potential Financial Advisor Red Flags

Meeting with a new financial advisor can be an intimidating experience, especially if you have never met with one before. You are allowing them access to information that most people don’t get – your finances. It’s important, as the potential client, to understand when the relationship may not be best for you.

Here are some financial advisor red flags to be aware of when meeting with potential advisors:

  • GUARANTEES – When it comes to money, there are no guarantees. If they are offering you any type of guarantee, especially stating a definite amount you will earn by working with them, this is a big red flag.
  • UNEXPLAINABLE STRATEGIES – An advisor should be able to explain their strategy to you, no matter how complex it may be. If they cannot clearly articulate what they are doing with your money, this is a potential for issues.
  • MISSING DOCUMENTATION – Every advisor should have documentation when investing in securities. If this documentation is missing, this is a red flag.
  • LACK OF VISIBILITY – One of the most important things when working with a financial advisor is that you have complete visibility to what they are doing. This means that they are giving you access to any of your accounts that they may be starting for you as well as keeping in touch on a regular basis (whether quarterly, bi-yearly, or yearly) to give you updates on your assets. This is important so that you can keep tabs on your account balances and be able to raise your own red flags if anything seems out of the ordinary.
  • OFFERS TO MANAGE YOUR MONEY FOR FREE – It’s common for an advisor to have a complimentary consultation at the very beginning, before you are technically a client, because both you and the advisor need to know if you have a potential working relationship. However, after that, there should be some sort of compensation. You don’t work for free, so you shouldn’t expect a professional to do the same.
  • NO CERTIFICATION OR LICENSING – This is specifically dependent on what type of service you are looking for, but it’s always a good idea to look for someone who is certified or licensed. You may also want to know what certifications or licenses other individuals in the firm have as well. While the specific advisor you meet with may have just one license or credential, his or her colleagues may have others that help round-out the team.
  • THEY DON’T ASK ABOUT YOUR GOALS – As we already established – your financial goals are important to selecting a potential advisor. If they don’t ask about them in your first visit then it’s a red flag that they aren’t actually going to help you reach your goals and are potentially just working to further themselves.
  • NO PRIVACY POLICY – Your privacy is paramount. You are giving this individual sensitive information that needs to be secure and safe. If the advisor you visit doesn’t offer you a privacy policy right away, ask for one. If they do not have one you may want to consider working with someone else that you know your information will be safe.

While red flags are important when knowing when to say no to an advisor, also remember that this is a relationship that you will be keeping for a long period of time. It’s ok to say no to a potential advisor because their personality really bothers you or you don’t seem to make a connection with them. You need to feel comfortable sharing details about your finances with them and if they don’t make you comfortable then it’s likely you will not want to offer this important information. This does not help them and especially doesn’t help you.

GuideSpring Wealth Strategies, LLC is a registered investment advisory firm that offers financial strategies for retirement or business (we are not CPAs and do not handle tax preparation or filing). We are registered in the state of Colorado and Texas. We help individuals work towards their financial goals by giving them a plan for their needs. If you would like learn more about what we can do for you, get in touch.

Check out our previous post: Questions to Ask a Financial Advisor

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