Financial advisers are supposed to take your cash and use it to generate more wealth for you, but sometimes they fall well short of the mark.
Even worse, you may not realize that an adviser has failed you until it’s too late to recoup lost money or missed opportunities. So, if you hope to retire comfortably, it’s crucial that you choose your financial adviser carefully and then keep tabs on him or her.
If you run into any of the following situations at any point, you should seriously consider giving your financial adviser the boot.
1. Your adviser won’t act as a fiduciary
A fiduciary is obligated to act in your best interests. A financial adviser who is a fiduciary must make recommendations that are best for you — not ones that might be considered suitable for you but benefit the adviser, such as by earning them a commission.
Not all financial advisers are fiduciaries — many are not, in fact — so the onus is on you to be sure that you’re working with a fiduciary.
It’s not enough, however, to ask a financial adviser whether they are a fiduciary and hear them say yes, says Brian Behl, a certified financial planner at Behl Wealth Management in Waukesha, Wisconsin.
“Also make sure this is in writing, not just an oral acknowledgment,” Behl tells Money Talks News.
Another way to weed out non-fiduciaries is to go through Money Talks News partner Wealthramp. This free service vets financial advisers and connects consumers with independent, fiduciary financial advisers in their area. To learn more about Wealthramp, check out “How to Find Your Perfect Financial Adviser.”
2. Your adviser won’t talk about compensation
There are multiple ways that a financial adviser can make money. Some earn commissions. Others are fee-only — for example, they may charge you a rate that is based on the number of hours they work for you or the size of the portfolio they manage for you.
So, it’s imperative that you ask advisers upfront about how they make money — and that an adviser gives you a full and clear answer.
3. Your adviser charges too much
High fees should get you walking out the door to another adviser.
Nothing can erode your nest egg quite like investment fees, whether from an adviser or an investment itself. Even a seemingly small fee — 1%, for example — can cost you tens if not hundreds of thousands of dollars over time, as we detail in “Of All the Fees You Pay, This Is the Worst.”
4. Your adviser only uses proprietary products
A financial adviser who only uses products such as mutual funds or insurance policies from the firm they work for is not independent and thus not someone you want to work with.
Behl notes that advisers are often paid more to sell financial products that were created by their firm. That creates a situation in which it’s in the financial adviser’s best interests to push proprietary products — meaning it’s probably not in your best interests to use those products.
“It is also highly unlikely that all the best solutions for your needs come from one firm,” Behl adds.
5. Your adviser has poor communication skills
A good adviser is good at both receiving and providing information.
They actively listen to your needs, wants and concerns and advise you accordingly, says Donovan Brooks, a certified financial planner at Storyline Financial Planning in St. Joseph, Missouri.
“An adviser should be above reproach when it comes to communication,” Brooks tells Money Talks News.
That includes keeping you updated about progress with your portfolio and keeping you informed about the process on the adviser’s end.
“An adviser that communicates poorly will keep you wondering and guessing,” Brooks adds. “Not to mention there is typically a correlation between poor communication and unmet needs/expectation.”