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Red Flags for Financial Advisors: How to Avoid Trouble

A fiduciary financial advisor career can often feel like walking blindfolded in a minefield. Although you know that there are dangers in the financial advisory world, pinpointing these hazards is not always easy. Understanding the complaints against financial advisers is essential if your goal is to protect and secure your investments.

Let’s not waste time: Client complaints are dominated by transparency issues. Imagine you hire someone who promises to illuminate a room, but leaves you in limbo about the fees and cost. Everyone hates surprises, and especially those that come with dollar signs. Clients are frequently caught unaware by hidden fees that were not disclosed upfront.

Imagine that you are all set for your beach holiday but end up in a resort with ski slopes because someone forgot to ask you what you wanted. What happens when advisors fail align their strategy with client needs? This is the classic case of misalignment which leaves clients out in cold.

Communication, or lack thereof, is another problem that customers face. It’s a bit like sending a text message into space hoping for reverberation. Clients are expecting regular updates regarding their money. Silence or cryptic response will not suffice.

It is also the absence of expertise that causes complaints. The act of handing over financial control to someone else should feel as reassuring as if you were entrusting an inexperienced person with the task of steering a ship on stormy seas.

It’s also a maze to file a complaint. Many get caught in a web of procedural requirements so thick that they’d have to use a machete.

What are the best ways to avoid these pitfalls and how can you prevent them? Do your homework, and I do mean deep research. You should research potential advisers just as you would when selecting a babysitter for a firstborn. Check credentials. Read testimonials just as you would a New York Times review. And conduct interviews with the same care as a professional journalist.

Imagine that you are setting rules for summer camps by demanding clarity from the very beginning. There should be no surprises or hidden charges. Everything should look as clear as fresh spring water.

Establish communication norms too. Establish communication norms. Decide on how often you’d like updates, and the format.

Don’t forget that you need to be more active than passively observing the landscape. You should keep asking questions until you feel satisfied. If it smells bad, then there is probably something rotten in the area.

As a conclusion (though there are no formal conclusions here), choosing the right financial adviser isn’t about picking someone who talks a great game. It’s about selecting someone who follows the rules and guidelines you have laid out with them.