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Handing someone your retirement savings is a big step. Most financial advisors are honest, but research from the National Bureau of Economic Research found that about 1 in 13 advisors has a misconduct record, and nearly half of those who were let go found work at another firm within a year.
Before you sign anything, watch for these seven warning signs.
1. They won’t say they’re a fiduciary at all times
A fiduciary is legally required to put your interests first. Ask directly, and ask whether that applies to every account and every recommendation. A vague answer is an answer.
2. They can’t clearly explain how they get paid
Flat fee, hourly, a percentage of assets or commissions: each creates different incentives. Ask for their Form ADV, which spells out fees and conflicts of interest.
3. Their record has marks on it
Look them up on FINRA BrokerCheck and the SEC’s Investment Adviser Public Disclosure site. It takes a few minutes and shows complaints, disciplinary actions and past firms.
4. They pitch products before learning about you
A good advisor asks about your goals, timeline, income needs and risk tolerance first. If the first meeting is a sales pitch, keep looking.
5. They promise returns
No one can guarantee market performance. Promises of steady, above-market gains are a reason to walk away.
6. They trade a lot in your account
Frequent buying and selling can generate commissions for the advisor while running up costs for you. This is called churning.
7. They want to hold your money themselves
Your assets should sit with an independent custodian, such as a large brokerage, not with the advisor directly.
A simpler way to find a fiduciary
FinanceBuzz works with Advisor.com, a network where every advisor is a fiduciary. Answer a few questions, see advisors matched to your situation, and book a no-cost consultation with the ones you like.
