Here is what you need to avoid in a financial advisor.
Earlier in the week, I wrote about eight things to look for in a financial advisor. After I wrote that article, I began to wonder about what actually drives people to seek out a financial advisor. Nine times out of ten, it is the result of some type of life event. Did you change jobs and need rollover advice? Did you have a baby? Have you recently retired, or are close to retirement? Did you buy or sell a business? Was there a death in the family? Did you inherit money? Or (in my fantasy world) did you finally win the Powerball? Hey…a guy can always dream!
No matter what the reason, when you pick up the phone, who are you going to call? Ghostbusters? (Sorry, I couldn’t help myself. It was a perfect setup.)
This important topic brings me to the point of today’s post — instead of talking about who you should look for, I wanted to discuss who you should avoid choosing as your financial advisor.
Number 1 – The “But I’m Family” Guy
Family and friends are great, and are normally a huge part of your life. Unfortunately, these close relationships don’t always mix well with money. I’m sure we all have that story about a friend who “forgot” to pay us back. The passive-aggressive back and forth went on for so long and got so awkward that you eventually just dropped it and moved on.
Do you want that to be your financial experience on a much bigger scale? My guess is no!
I’m not saying that you should rule out family and friends entirely, but take the time to think it through. As you would with any candidate, make sure they have the requisite expertise and experience. Don’t use them just because they’re a friend or a family member.
Number 2 – The “Wine & Dine” guy
Many financial advisors use seminars to attract new clients. They serve you a nice dinner and offer some free education. However, the real purpose of these events is to get you in the door and get your phone number. Be prepared to receive numerous follow-up calls encouraging you to set up a meeting. You shouldn’t feel like you owe this person anything, but plenty of people fall into this trap.
How often do you eat out with your primary care physician? What about your accountant or attorney? Probably not that often. That being said, should you really be choosing a financial advisor because they buy you a nice dinner or hand out some free advice that you could probably get in a dozen other places? No! You should pick an advisor because he or she is an expert, they add value, and are genuinely good at what they do!
Number 3 – The “Jump the Shark” Guy
Remember how great your Blackberry was when you first started using it? BBM? Genius! Internet access in the palm of your hand? Back then, nothing…and I mean nothing was going to top your Blackberry.
And then…you got an iPhone.…
Just because someone has worked out in the past doesn’t mean they will work for your future needs.
Your advisor needs to continually earn your trust and business every day. If they don’t, then you should feel free to leave. Don’t let your advisor make you feel obligated to continue working with them. Let’s be honest, who wants to be the last person who still owns a Blackberry?
Number 4 – The “Credentials” Guy
In the alphabet soup of financial credentials, it’s easy to get lost. However, it is important to know that all financial credentials are not created equal. Many require only a simple application and an annual fee. That’s it.
Others require real work, including comprehensive exams, years of experience, and an obligation to uphold a certain standard of conduct. When you’re being pitched by a potential financial advisor who rattles off half a dozen acronyms at you, be sure to ask what those credentials actually mean (if they mean anything at all). As I’ve said before, if you’re looking for a simplified standard, find a CFP® practioner.
Number 5 – The “Beat the Market” Guy
WARNING: Wave the red flag! Loud sirens should immediately go off! These types of promises should be an easy indicator that this advisor is not the right fit for you.
Unfortunately, our alarm systems don’t always work. We all swoon at the alluring sound of high returns and offers being promised by a financial “expert”.