Who Can You Believe? Seven Warning Signs of an Untrustworthy Financial Advisor

As many investors learned during the tumultuous year of 2020, reliable financial and market advice has never been more valuable. And yet, when the markets are experiencing wild swings such as those we saw a year ago, the number of “experts” claiming to know “what you must do now” to protect your investments or maximize the growth in our portfolio seems to increase, right along with the headlines in the financial news media. Part of the reason for this is because scam artists and even some investment professionals—often more interested in generating commissions than in your long-term best interests—know that in an atmosphere of financial uncertainty, it’s easier to attract the attention of investors who are worried about their investments and wondering what to do.

Is there a way to know who you should trust to help you make the best long-term financial decisions? We suggest seven items you should consider for anyone to whom you are considering entrusting your financial matters.

1. Do they have a history of complaints or violations? The Financial Industry Regulatory Authority (FINRA) is the authorized regulator for brokerage firms doing business in the United States. Their free website, BrokerCheck, allows you to instantly see if the person trying to get your business has a history of violations or complaints from clients.

2. Do they consistently downplay risk or emphasize how much you will earn on an investment? No investment—including bank CDs or even US Treasury bonds—is completely without risk, and anyone who seems to be telling you otherwise is very possibly more interested in making a sale than in guarding your financial best interests.

3. Are they creating a sense of urgency? Phrases like “we need to act now,” or “this investment won’t be available much longer” should be treated as flashing danger signals.

4. Do they speak in “investment-ese”? Some people use “insider” jargon as a way to project knowledgeability, experience, or professionalism. Actually, true professionals with your best interest in mind do the opposite: they explain concepts and recommendations in everyday terms, and they patiently answer questions until you have all the information you need to make a decision on your own terms.

5. Are they name-droppers? This technique—implying that certain well-known individuals or entities invest with them—was one of the ways that infamous scammer Bernie Madoff inspired trust and confidence in his victims. If a would-be advisor or broker offers such information yet is unwilling to provide contact information so that you can verify the references, be extremely wary.

6. Do they spend more time getting to know you and your needs than in telling you about themselves? A professional who is acting in your best interest will always be more interested in your priorities, your needs, and your long-term plans than in impressing you with their credentials. You should only work with someone who takes the time to fully understand your situation and who answers all your questions in a way that provides the knowledge you need.

7. Are they vague about how they get paid? If the individual or firm does not fully disclose—in writing—how they are compensated for providing their services, you should not do business with them.

We are certified, professional, fee-only wealth managers. Furthermore, we are fiduciaries, which means we are professionally and ethically bound to provide information that places your interests ahead of everything else, even if doing so is disadvantageous to us. To learn more about why we believe it is important to work with a fee-only advisor, click here to read our article, “Fee-Only Should Mean Just That.” And if we can assist or answer a question for you, please contact us.

Buen Camino!

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Go to the Bernhardt Wealth Management Blog where this was first published to read this and other blog entries.

About Gordon J. Bernhardt: President and founder of Bernhardt Wealth Management and author of Profiles in Success: Inspiration from Executive Leaders in the Washington D.C. Area, Gordon and his team provide financial planning and wealth management services to affluent individuals, families and business-owners throughout the Washington, D.C. area. Since establishing his firm in 1994, he and his team have been focused on providing high-quality service and independent, unbiased financial advice to help clients make informed decisions about their money. For more information, visit Bernhardt Wealth Management and Profiles in Success.