1. What are the signs of a good financial advisor?
A good financial advisor is interested in getting a holistic view of your situation and creating a plan to reach your goals. Good financial advisors educate you to help you collaborate with them on your journey. A good advisor gives you comfort that should anything happen to you, your dependents are in good hands.
You should always seek an independent advisor if you can as they are objective advice givers. Remember this is about getting the best advice for you and you need someone that has a sound understanding of all products available not just the products they have to offer. Finding a good qualified advisor is also important. Someone with experience and or CFP qualifications.
A good sign is to understand the fees they charge with the best advisors charging around 0.50% pa or less in fees. Remember that 1% in extra fees results in 20% less capital over 20 years. Ask what technology they are using and where you can log in to see all you have with them. The best advisors keep up to date and are investing in technology to ensure a more convenient and transparent relationship with them like banks have with online banking. If a financial advisor is not providing this type of technology they do not have a plan for the future and you can’t plan a future with someone that has no plan for their businesses future.
2. What are the signs of a bad financial advisor?
Bad financial advisors will only seek information from you to identify opportunities to sell products to you. This is about getting advice not about being sold to. Fees to these advisors become more important than clients. You should be able to get a simple breakdown of fees whenever you ask. If your advisor is vague on fees and can’t give you a simple straight answer then be concerned. Danger signs are when advisors promise you future returns to attract your business. The only future returns that can be guaranteed are underwritten by reputable financial institutions.
Does your advisor know about ETF’s and structured products? These products are growing in popularity and providing new and exciting opportunities for clients where they can achieve lower fees and capital protection. A poor advisor does not keep up to date with products and technology which prejudices you the client. Poor advisors try to scare you into needing them. If you feel confused move on. If they work in the industry and can’t make things simple for you then chances are you will end up with products you don’t understand with disastrous consequences.
3. What should you do if you feel you are getting bad financial advice?
Firstly seek a second opinion from a respected independent advisor. If you are unsure look an advisor up on “LinkedIn” to get an idea of their background and credibility. A good independent advisor will be able to give you a sound opinion on whether you are getting good advice. They should not charge for this. Depending on the severity of what you may find you may have different remedies. It is an unfortunate that advice can vary dramatically from advisor to advisor and as an industry many are not well informed enough to pick up when they are being compromised. Our industry needs to do more to educate clients on what they can and should expect which will help the client and ethical advisors.
4. Besides moving on to another advisor – should you report the advisor too? Or should you dismiss it as a case of you just getting the bad advice?
If the advice is in breach of any agreed terms that have been agreed to by the client or there is criminal wrong doing there is no doubt the advisor should be reported. This is why it is critical to understand what you sign and to make sure you understand the choices you make.
Make sure your advisor answers you questions and explains to your comfort any concerns you may have. Often clients feel they have received bad advice which may be the case only to find they signed some document that agreed to that option.
The advisor is not necessarily off the hook in cases like this as they are the expert and should have known better and treated you fairly.