Do you know how to spot a bad financial advisor?
Nov 16, 2022, 6:00 AM | Updated: 5:42 pm
SALT LAKE CITY — You put your nest egg and your trust in a financial advisor, but what do you do when that trust is broken?
You could try suing to recoup your lost investment, but you may have signed a contract called an investment advisory agreement when you hired your financial advisor. If so, the contract states you and your advisor must resolve any dispute in arbitration rather than in the courts as reported by The Wall Street Journal.
Sloan Schrage, KSL investigative producer, joins KSL NewsRadio’s Dave and Dujanovic with Dave Noriega and Debbie Dujanovic to discuss the red flags to know in order to spot a bad financial advisor.
Your financial advisor promises investors they can consistently outperform the markets
“I think the average rate returns is like 9.2%. So, if you’re going to promise greater than that, I would be a little bit wary,” Schrage said.
The advisor talks more about themself than you
“They should be talking about what they can do for you, your goals, your risk tolerance . . . They should get more of a picture of you than about them,” he said.
Debbie shared a telltale sign of a bad financial advisor: “They pull up in a fancy car. . . . They love to drive fancy cars. They show you their fancy boats and their fancy homes.”
Not understanding how you’re paying a financial advisor
Some advisors are paid a flat rate or fee only. Others are paid a percentage of an investor’s assets under management.
Beware of any advisor paid a commission by mutual funds.
“Know what the commission is, how much they are earning off the products they may be selling from a company,” Schrage advised. “If they’re not transparent about how they make money, that would be a red flag.”
“One thing that kind of surprised me is if they’re moving your money around. They could be getting a cut every time they move your money,” Dave said.
Schrage said if a financial advisor is confusing or defensive about how you are paying them, you might want to consider another advisor.
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Dave & Dujanovic can be heard on weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play.