The relationship with your investment professional, in our opinion, must be based on trust and should include clear boundaries and guidelines that both you and your advisor understand and follow.
Sometimes choosing the right advisor can be difficult. If a potential advisor makes - or even implies - any of the following statements, you may want to consider them a red flag and it might be wise to keep on looking.
1. Investment Professionals Can Predict the Future
We understand; it would be great to have a working crystal ball to predict market movements. However, no financial professional can tell you what's in the future, even if they tell you otherwise. In fact, studies conclusively show that advisors are unable to predict future market movements based on past market performance.
2. Financial Strategies can Generate Returns with
Actually, the opposite is true: there is no return without risk. One of a wealth advisor's roles is guiding you to take on the right amount of risk to maximize your returns. They key lies in determining how much risk you personally feel comfortable with.
3. This Investment Management Solution is an Economic Certainty
While it may be easy for investment professionals to play off of clients' fears and anxieties around economic issues such as inflation, this is an unscrupulous method of doing business. Similarly, touting certain investments as a "sure thing" is just as shady -- and something a fiduciary wealth advisor is bound (by law and by ethics) not to do.
4. You Can Create a Cookie Cutter Comprehensive Financial Plan
Savvy investors -- and competent financial advisors -- know that a comprehensive financial plan must be tailored to individual needs and must evolve and change over time, along with investors' circumstances and needs. Strategic financial planning is an ongoing, dynamic process that requires wealth advisors to consistently engage with investors to gage their needs. Financial planning isn't a one-size-fits-all, "set it and forget it" service.
5. Discouraging Investors From Seeking a Second Opinion
Just as you may want to seek a second -- or third -- opinion from a healthcare provider, you should feel free to do so when it comes to your financial strategies. If an investment professional discourages you from attempting to educate yourself and be well-informed, that's a big red flag.
6. Investment Professionals Shouldn't Have to Explain Their Fees
If a potential advisor tells you that their fee structure is just to complicated to explain, keep on looking. You deserve to know exactly what and how much you're paying for, as well as how an advisor makes their wages. Advisors who are paid on commission may try to sell products that aren't necessarily in clients' best interests, if their paycheck depends on it. In contrast, fee only wealth advisors are paid a flat fee, so they're free to recommend the best investment products for your portfolio. A reputable advisor will always provide you with a clear explanation of how they're paid and what you're getting for your money.