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Can You Trust Your Financial Adviser?


Know when you're getting scammed so you can get out fast.

When it comes to wooing customers, brokerage firms love warm and fuzzy messages. But that doesn't mean you should let your guard down. Here are five indications you should fire your financial adviser ASAP:

1. He or she doesn't return your phone calls.

Don't expect your adviser to work miracles -- he or she can't predict every blip in the stock market and has no control over the big boss' $35,000 toilet bowl. But what your adviser can do is address your questions and concerns in a timely fashion. Managing money is a hectic business, but if someone has enough time to take you on as a client, they have enough time to call you back in a reasonable time frame -- or have an assistant do so.

You're not only paying for investment products, you're also paying for service, and you deserve to be treated with respect. If your calls go unanswered, you're being ripped off. It's as simple as that.

2. He or she sells you expensive, inferior products.

Before buying any financial product from an adviser, you should ask two simple questions:

Are there cheaper and better equivalents? For example, mutual fund A may have better returns and lower expenses than mutual fund B. So if someone's trying to sell you the latter, you'd better hear a pretty good reason why it's appropriate for you.

Which product pays the adviser more money? If you find yourself regularly being steered toward products that generate high commissions, you just may be getting swindled.

More importantly, asking these questions shows you're an informed client. Con-artists like easy marks, and being vigilant will keep them away.

3. He or she focuses on selling you the house brand.

House brands are awesome at places like Costco (COST), but they stink when it comes to financial services. The fact that you're a Wells Fargo (WFC) customer doesn't mean that you need a Wells Fargo mortgage and a Wells Fargo CD and a Wells Fargo mutual fund. You should use the best products in each category, regardless of brand. Selling the house brands may make your adviser's parent company happy, but it does nothing for you.

There are some benefits to shopping at a financial-services supermarket -- like easier organization and record-keeping -- but quality is not one of them. A farmers-market approach -- where you shop around for the best goods from different vendors -- makes more sense.

4. He or she pushes inappropriate products.

This one is pretty simple. Your adviser should have a pretty good idea of your long-term financial goals and tolerance for risk. So if you're 70 and enjoying retirement, you shouldn't be hearing pitches for the latest Vietnam-focused ETF or leveraged mutual fund.

And if you're 30 and not planning on retiring for another three decades, you shouldn't have all your money in low-risk investments like bonds and money-market funds.

5. He or she does things without your permission.

One of the oldest brokerage scams in existence is churning: doing unnecessary buying and selling to generate commissions. If you aren't monitoring your account statements, start doing so today. If investments are being bought and sold without your permission, you're getting scammed. The exception would be if you gave your adviser full control over your account. But even in that case, be attentive. Trust was made to be abused.

If something looks wrong to you, start asking questions.

If your adviser's behavior fits into these categories, the solution is simple: Go shopping. Ask friends and relatives for referrals, and start talking to new advisers. Chances are you'll find someone better to work with that has your best interests at heart.

And if your adviser is a good person provides you with quality advice and service, remunerate him or her. Talk the person up to your friends and send referrals. These are the types of people we need, so let's reward them.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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