7 Key Signs Your Financial Advisor Is Giving You Bad Money Advice
Written by
Brooke Barley
Edited by
Joe Evans
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So, you have a financial advisor. This is a great first step, but now, you’re starting to wonder if the advice they’re giving is actually… not great.
You have a hunch that they have their interests in mind more than yours, or some steps they’re recommending simply don’t make sense. If you want to be sure you’re getting bad advice from your financial advisor, keep reading.
Here are the signs financial experts said to look for. If your advisor is doing any of these, it’s time to look for a new one.
They’re Not Clear About Their Pricing
“How much is the advisor being paid is a fair question!” said Phil Lebkuecher, a BFA at Shadowridge Asset Management, LLC. He said to ask if there are restrictions on getting your money back, or fees and expenses if you wish to liquidate the investment.
He also recommended understanding exactly what the ongoing costs are. Everything should be discussed upfront, and you should feel that your advisor is being 100% transparent with you.
They Have a Scattershot Investing Approach
Investments are crucial if you want to grow your financial portfolio. Any financial advisor is going to recommend investment opportunities, but if they seem all over the place, that’s not a good sign. Alec Kellzi, a CPA at IRS Extension Online, said that if you feel your advisor has wildly inconsistent strategies, you should find a new one.
“Erratic decisions that appear to aggressively chase hot sectors one month only to do a full 180 the next is a huge cause for concern. That is not calculated advice, it is desperation gambling with your nest egg.” Kellzi said.
If your advisor’s investment recommendations make no sense to you, then they probably don’t make sense to do at all. You should feel comfortable with what your advisor is recommending. After all, it’s your money. Don’t put your money toward anything you do not understand.
They Are Charging You Lots of Transaction Fees
Speaking of investments, your advisor should keep your best interests in mind when recommending places to grow your money — not theirs.
If it feels like they’re constantly changing your investments simply so they can make a buck, you need to get out.
“Sure, there are times when portfolios need rebalancing or adjustments, but if it feels like a constant churn just to generate commissions for them, that is a big red flag that their priorities are misaligned,” Kellzi said. “Your long-term growth should be the focal point, not lining their pockets.”
They Don’t Respect Your Risk Tolerance
When you are working with your advisor, you should feel like they are taking your thoughts, feelings and goals into their approach. If you have been honest and told them you do not want to put your money into high-risk investments, they should abide by that.
“Maybe you are a conservative investor looking to preserve wealth, but they keep pushing you into speculative bets or complex financial instruments you do not fully understand,” Kellzi said. “Ethical advisors tailor strategies to each client’s unique situation and comfort levels and do not force a one-size-fits-all approach.”
If you feel like you’re being pressured to put your money toward investments, that’s a sign of an advisor who isn’t thinking about your well-being. It’s time to seek someone who truly listens to you when you communicate.
They’re Overly Optimistic
If your advisor is immediately promising you riches, that’s a red flag. Sure, financial advisors want you to make money, but they should never guarantee it.
“Top professionals appropriately set client expectations and would not make outlandish promises or guarantees that no investment can truly deliver on given the potential for volatility,” Kellzi said.
Lebkuecher agreed that if an advisor is telling you nothing could go wrong, they’re lying to you.
“Good advice means explaining the benefits, risks and costs of the financial decisions,” Lebkuecher said.
They Don’t Follow Up
Lebkuecher said if your advisor seems to take your money and never talk to you again, you’re working with the wrong person.
“A lot of salespeople have a great sales pitch. Then they disappear after the sale is done. The difference between a salesperson and a financial advisor, especially a fiduciary advisor, is the focus on follow-up. A fiduciary advisor should reach out with ongoing reporting of results, good or bad, as well as explanations and ongoing guidance.” Lebkuecher said.
You Don’t Trust Them
There’s a vibe that we all get from time to time that might not have solid evidence, but you just feel something isn’t right.
If you simply don’t trust your advisor, you should find someone else.
“If your gut is picking up on any deceitful or unethical behaviors that seem to place their interests ahead of yours, that is the biggest red flag to heed. Your wealth is far too important to let bad advice jeopardize your future.” Kellzi said.
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