No one wants to be scammed, especially when it involves money. You should be able to trust your financial advisor, but there are many skeptical advisors in the business. They have a suspicious history, lack credentials, and charge excessive fees. Before you get too involved, review these three warning signs of a shady financial planner.
They Don’t Have A Regulatory Body
Anyone can advertise as a financial planner, but legitimate advisors are registered with a regulatory industry body. Referred to as the Financial Industry Regulatory Authority (FINRA), the industry body oversees brokers and regulates fee-only advisors.
To check if your financial advisor has a regulatory body, go to FINRA’s BrokerCheck, which identifies if they have any disciplinary actions against them. The website also provides information about their experience and qualifications. For fee-only advisors, refer to the SEC’s Investment Adviser Public Disclosure webpage. If your advisor isn’t listed on any of these websites, they may not be a legitimate financial planner.
They Lack Credentials
You should trust your financial advisor. After all, they discuss your investments, retirement plans, estates, taxes, real estate, etc. This personal information should be handled with the best professionals.
Review your advisor’s credentials. Check to see if they have one of three certifications:
- A certified financial planner (CFP), completed after taking college-level financial planning courses, three years of experience, and a 10-hour examination.
- A chartered financial consultant (ChFC), earned after studying insurance, estate planning, retirement funding, and investments.
- A chartered financial analyst (CFA), specializing in security analysis, stocks, bonds, investment management, and corporate finance.
They Make False Promises
If a financial advisor promises to be exclusive and has locks on certain investments that other planners don’t have access to, run far away. According to Larry Miles, a principal at AdvicePeriod, “If your advisor promises to get you into investments that only he or she (or their firm) can access, that’s another lie.”
In addition, Kristin Hull, CEO and founder of Nia Impact Advisors, acknowledges that it’s a red flag if a financial advisor claims “to know everything” about all areas of your financial planning, instead of referring to a colleague who specializes in a specific asset.
Be careful with who you trust to have access to your finances. It’s your money and plans. You should be confident with your advisor, not wary of their suspicious activities.