Looking For A Financial Adviser? Watch For These Red Flags

If you see these signs when looking for a financial adviser, keep a tight grip on your money. And run.

Financial Advisor
(Image: iStock.com/simonkr )

You’re looking for a financial adviser, and you’ve just been introduced to a truly impressive candidate. Charming. Articulate. Well-educated. Classy dresser. Hair is on point! Even God-fearing.

Is she perfectly qualified to help you manage your money? Or the next Bernie Madoff—only with a fierce weave and a great mani-pedi? If you see these signs when looking for a financial adviser, keep a tight grip on your money. And run.

 

Promises to Double or Triple Market Rates of Return

 

When looking for a financial adviser, bypass those who promise unrealistic, above-market rates of return. For example, if the S&P 500 is delivering 8% returns, be suspicious if she claims she can deliver 15%.

 

Describing Any Investment as Absolutely Safe 

 

Saying or leading you to believe that an investment is guaranteed, risk-free and/or can’t result in a loss for the investor is another major red flag. There is no such thing as an investment in which you can’t lose your money.

 

Recommending Investments You Don’t Understand and Can’t Explain

 

Suggestions that an investment they recommend is too complex for you to understand, and requires you to put all of your trust in her as a financial professional. Never put money into investments you don’t understand for yourself, including knowing the risks. If you can’t explain your investment to a disinterested third party in a way that they can understand, either you don’t really get it or it just doesn’t make sense.

 

Wants Blanket Authority to Make Decisions with Your Money

 

Hold on to your money if he offers an opportunity with an unclear, vague, or unstated purpose, such as a blind pool for investing in the stock market—at his discretion, with no chance for you to approve it in advance. Never surrender authority over your own money, and always have a clear understanding of where it is going.

 

Offers a Unique, Secret, Never-Before-Heard-Of Investment Opportunity

 

When looking for a financial adviser, avoid those who offer exotic investment opportunities, such as top-secret, proprietary technology or inside information from Wall Street sources. These too often turn out to be excessively risky, deceptive, and even illegal.

 

You Must Invest NOW—or Lose Out

 

Watch out if he pressures you to invest quickly, in order to not miss a so-called once-in-a-lifetime opportunity. A good financial adviser will never pressure you to invest, and should always work to help you understand what you’re investing in, including the risks involved, and will always give you the final say on what happens with your money.

 

 

 


Black Enterprise Executive Editor-At-Large Alfred Edmond Jr. is an award-winning business and financial journalist, media executive, entrepreneurship expert, personal growth/relationships coach, and co-founder of Grown Zone, a multimedia initiative focused on personal growth and healthy decision-making. This blog is dedicated to his thoughts about money, entrepreneurship, leadership and mentorship. Follow him on Twitter at @AlfredEdmondJr.