E Is Your Financial Advisor Trustworthy?

“If people like you they'll listen to you, but if they trust you they'll do business with you.” ----  Zig Ziglar

People want to do business with people they trust. The 2008 financial crisis left the industry with a black eye, and for good reason. Unfortunately, not much has changed in the past eight years as most financial services firms continue to place short-term profits ahead of long-term customer needs. Individual investors have valid reasons to be wary of financial advisors, but there is good news. It’s easier than investors might think to do some initial screening on just how trustworthy your advisor may or may not be.

While in any relationship, trust takes time and is built in incremental steps, the following are ten questions to ask yourself and your advisor that will certainly give every investor a decided advantage.

  1. Does the advisor have the “right” registrations in place? Ask your advisor for a copy of Form ADV, if applicable, including verified credentials.
  2. Does the advisor possess personal values that are aligned with yours? Ask the advisor to share their values with you. A trustworthy advisor should be able to do so without hesitation.
  3. Does the advisor ask the “right” questions? Don’t hire an advisor who hasn’t spent the time reviewing your long-term personal, professional and investment objectives and ensuring that an appropriate plan is implemented. Don’t hire an advisor who hasn’t suggested that your spouse be part of the conversation.
  4. Is the advisor “independent?” Often advisors who work for large firms are prohibited from selling “non approved” financial products. That’s not to say these products are “bad,” in fact they might be quite good. Over using or over promoting in house funds is good for the advisor's firm but is usually not in the client’s best interests.
  5. Is the advisor transparent about fees? A trustworthy financial advisor should not sell products with hidden fees. It’s the investor’s right to know how their money is being spent.
  6. Will the advisor provide references? Check with one or two clients who have been doing business with your advisor for a period of years.
  7. Does the advisor have a solid track record of returns? There is simply no point in hiring a financial advisor who does not have the expertise required to make money for his or her clients. It’s surprising how long clients are willing to extend the benefit of the doubt to an advisor who isn’t performing.
  8. Does the advisor regularly communicate with clients? How does the advisor plan to communicate? How often?  Lack of communication is one of the leading reasons why investors seek new advisors.
  9. Is the advisor transparent with your money? In this day and age of online financial services, can you see your account and access funds at your discretion, without the “okay” from your advisor? Also confirm that your money is with a third party custodian.
  10. Has the advisor parked his or her ego at the door? Make sure the advisor you select places your best interests before his or her personal or professional needs.
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FACTS® Managed Accounts were independently audited from Feb.1, 2013-Jan.31, 2016. Prepared by FACTS Asset Management LLC

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