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In the realm of financial management, consulting a financial advisor can be a smart decision. A proficient financial advisor can assist you in navigating the intricacies of investments, retirement planning, and wealth management. Nonetheless, not all financial advisors are equally trustworthy. There are times when individuals encounter unscrupulous advisors who prioritize their own interests over their clients’. To safeguard your financial health, it’s vital to be cautious and attentive to the warning signs when working with a financial advisor. In this blog post, we’ll unpack some of the crucial warning signs to be aware of.
Aggressive Sales Tactics
Be on the lookout for advisors who employ aggressive sales techniques to push financial products or investment opportunities on you. A trustworthy advisor should aim to educate and inform you about your options, enabling you to make well-informed choices. If you feel pressured or coerced, it’s a substantial warning sign.
Neglecting Fiduciary Duty
An advisor who functions as a fiduciary is legally bound to act in your best interests. Advisors who neglect this responsibility may prioritize their financial gain over yours. Inquire whether your advisor operates as a fiduciary, and if they don’t, contemplate finding one who does. And not just one that says they do, but one who understands that they are legally bound to do so.
Absence of Transparency
Transparency is a cornerstone of any financial relationship. If your advisor isn’t forthcoming about fees, potential conflicts of interest, or the risks associated with investments, it’s an indicator that they may not have your best interests at heart. A dependable advisor will offer clear and comprehensive information about all facets of your financial plan. (this video unpacks our approach to investment management).
Making Unrealistic Promises
Be skeptical of financial advisors who make extravagant claims or guaranteed returns on investments. The financial markets are subject to fluctuations, and no advisor can guarantee specific outcomes. If an advisor makes overly optimistic promises, it could be an attempt to lure you into a risky or fraudulent scheme.
Excessive Trading
Engaging in excessive trading, often referred to as “churning,” can be a warning sign. This behavior can lead to higher fees and commissions for the advisor making trades in a brokerage account or in an advisory account held at an affiliated custodian at your expense. Keep an eye on your account statements for indications of unusual or frequent trading. Look for an independent advisor that offers a wrap program (which covers commissions or trading fees on your behalf as part of one comprehensive advisory free). Having the peace of mind knowing you are in an appropriate portfolio is crucial to a sustained financial planning relationship.
Inadequate Communication
A capable advisor will maintain regular communication with you to ensure you’re informed about the status of your investments and financial plan. If your advisor becomes elusive or rarely provides updates, it’s indicative of subpar service. Proper communication and quarterbacking of your entire financial plan are required to help sustain your financial plan through its ups and downs.
Complex or Jargon-Laden Language
An advisor who employs overly intricate jargon or refuses to simplify financial concepts may be attempting to obscure the true nature of their recommendations. A trustworthy advisor should be able to communicate clearly and help you comprehend your financial situation.
Complaints or Legal Issues
Conduct your own research by examining the advisor’s background for any instances of disciplinary actions, grievances, or legal troubles. This can be done through regulatory bodies or organizations that oversee financial advisors. You can look up any registered financial advisor or firm here: https://adviserinfo.sec.gov/
Collaborating with a financial advisor can be a pivotal step toward achieving your financial aspirations, but it’s imperative to be discerning and identify the warning signs that may indicate an untrustworthy or unqualified advisor. By staying informed, posing the right questions, and conducting background checks, you can make an informed decision and help ensure that your financial advisor genuinely has your best interests at heart. Your financial future is too important to leave to chance, so always remain vigilant for these warning signs to safeguard your wealth and financial well-being.
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Important Disclosures:
Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.
EWA, LLC dba Equilibrium Wealth Advisors, is an SEC-registered investment advisory firm providing investment advisory and financial planning services to clients.
Investments in securities and insurance products are not insured by any state or federal agency.
To view EWA’s public disclosure, registration, Form ADV and Part 2B’s, click here.
To view EWA’s Client Relationship Summary (CRS), click here.
In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.