Financial Planner Warning Signs

7 Financial Planner Warning Signs

Do you count on financial planners to guide you with wise advice for your personal money matters? Giving that sort of control to someone can understandably be scary. To feel more confident in your decision, you'll want to know that your planner is qualified and working in your best interests. While recognising that issues with complete certainty may be challenging, there are some red flags you should watch for. If research into your planner uncovers any of these warning signs, it might be time to find someone else or at least to start asking questions.

Here are some of the key warning signs:

1. Absence of credentials Everyone wants to believe their financial expert is proficient and experienced. One sign this may not be the case is a absence of professional certifications, like CFP, CFA, CPA or the ChFC designation. In the What is a Financial Advisor Planner blog https://www.localpropertyteam.com.au/what-is-a-financial-planner we explained that certified financial planner is a designation awarded to individuals who successfully complete the CFPÒBoard’s initial exams, then engage in ongoing annual education programs to maintain their skills and certification. This designation establishes their professional qualifications. To check the status of a CFPÒ visit the CFP Board website at https://www.cfp.net/

• Take the time to learn more about these designations so that you will know exactly what your planner had to do to earn them.
  
  
• If you only want tax advice, a certified public accountant (CPA) might be the best way to proceed. For investment advice, a Chartered Financial Analyst (CFA) is most likely a better choice. If you need a complete financial plan, a CFA, certified financial planner (CFP), or chartered financial consultant (ChFC) will probably be the best.
  
  

2. Lack of Time If your financial planner can't make the time to have a minimum of one thorough meeting each year, you may have a serious challenge. When it comes to getting financial advice, you and your goals are all that matters.

• As things can change over time a financial advisor must be updated if they are going to be effective. If your advisor doesn't have time to meet, do they really have enough time to do all the other things they pledged to do?
  
  

3. Poor Communication Skills If your financial advisor really does know their stuff, they should be able to explain financial concepts and strategies with relative ease. If you can't get their gist, perhaps they just don’t understand enough to explain key concepts to you.
   
   
4. Over-Promising Promises of significant returns should raise a red flag. A planner can talk about potential returns but should avoid making any guarantees. While confidence is great, honesty is even better. Big promises can mean a potential scam or that a financial advisor is over-confident and possibly also inexperienced.
   
   
5. A lack of real transparency Your advisor should always be forthcoming about the types of investments and the fees and commissions involved. People in these professions can earn significant commissions if they promote certain products. But, are those products in your best interest?

• Request to see all the fees that you're being charged for any applicable transactions, and ask about commissions. Are you being offered an ongoing portfolio fee in which you’re paying twice? In relation to commissions ask yourself, does your accountant charge every month, in advance, for next year’s tax return or if you might call them directly? Ethically, planners should do what's in the client's best interest.

• You are entitled to ask for a Fee Disclosure Statement. If you have insurance, you should write to your planner and ask them to send you a statement outlining all the commission they have (or will) receive each year from your products and portfolio.

• The best way to ensure your planner doesn’t receive unintended commissions is to use an independent financial planner who must, by law, return trailing commissions to you. As a fiduciary, planners are legally bound to put their client's best interests ahead of their own. 

6. Excessive selling If your advisor is attempting to sell you a complicated option deal that you're struggling to understand, you should ask yourself if this is really right for you?

• The financial plan produced should be tailored to your goals as well as your level of comfort. This takes into account your investment risk tolerance assessment and risk aversion. Don't allow your advisor to push you into something that's not right for you.

7. Disorganised A lot of record keeping goes along with being a financial planner. If your planner isn't organised, then they should be able to hire someone that is. This is your money we're talking about. You need those records for taxation time, at a minimum!

None of these warning signs is necessarily a deal breaker, but they are definitely things to watch out for. Most importantly, be sure you that you feel confident and comfortable with your financial planner. A good financial planner will get to know you, assess how much risk you are comfortable with and your response to risk aversion. They also keep you informed and help you achieve your goals. This your money at stake here, so make it work for you.