Beware of Vipers in the Financial World: 3 Warning Signs
Getting good, ethical financial advice is imperative as you work toward retirement, and, unfortunately, that's not a given. Here are three red flags that your adviser may be doing you a disservice.
![](https://cdn.mos.cms.futurecdn.net/ZwyPWf7r3yrzHZ7rH4GQi4-415-80.jpg)
Handing over your nest egg can be scary. You’re basically putting your retirement — your future — into someone else’s hands. That’s why it’s so important to exercise extreme caution when choosing a financial professional.
Even if you’ve found someone you think you can trust, it’s smart to remain vigilant. As with any profession, there are people who make promises they can’t keep. Some are great at the pitch but fail when it comes to the follow-through. And some just haven’t been trained very well; their mistakes aren’t intentional, but they can be just as harmful as more purposeful predators.
Keep an eye out for these red flags, which could be a sign that your money isn’t getting the best management. It might be time to move on or, at least, pay more attention and ask more questions.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. You’re conservative, but your portfolio isn’t.
If you’ve had a conversation about market risk and your ability to deal with it (both financially and emotionally), that’s a good start. But your idea of a conservative or low-risk financial strategy might be much different from your financial professional’s. If you put too much emphasis on your expectations for growth, your financial professional may simply be confused. Or he might be on autopilot, putting everyone he works with into the same moderate mix.
A better way to frame the discussion might be to talk about how much you’re willing to have at risk. When I ask prospective clients that question, they might say 10%, or even zero. Then I look at their portfolios, and they don’t match up at all. These people have no idea they’re so exposed to risk. If an individual is young, there’s always a chance to rebound from a big loss. But if you’re close to retirement or already there, and your portfolio isn’t protected, it could be devastating.
2. You’re offered limited choices.
Your financial professional should be able to show you a variety of options for your financial strategy. Make sure they explain the differences in the products and inform you why these products can help you pursue your financial goals.
If there were only one product worth having, the others would go away — and there are tens of thousands of financial vehicles out there. Why present only one? Possibly, it’s because the guy you’re working with is more salesman than financial professional. The firm he works for may have proprietary products or a limited selection of products. He may have been trained to present only those products, and there may be a bonus or commission involved. Make sure you know how your financial professional is compensated, because it could affect the options you’re offered.
3. There’s a whole lot of trading going on.
If you notice excessive buying and selling in an account over which you’ve given your broker discretion, and those trades seem to benefit him but not you, that could be a sign of “churning,” which is the deliberate buying and selling of securities to generate trade-based fees. And it’s illegal.
Despite regulatory oversight, these activities can go on under the radar, so it’s up to you to watch your statements. What are some signs to watch for? There should be some decipherable rationale for the movement: If the stock’s position went up, for example, and it’s time to take the profits. Or if it went down and you have to stop the loss. But if it seems as though there’s just random movement from one commissionable product to another, take note and ask questions.
Limiting fees and taxes can help you work toward a successful retirement — if not well-managed, they can eat up the money you’re depending on for income. If you’re paying taxes on money you didn’t get, or fees on excessive trades, that’s an added expense.
What should you do if you think your financial professional might be mishandling your money? Some firms offer a no-obligation portfolio analysis to prospective clients — and there are online trackers, as well. These options are worth checking into, especially if there are no strings attached. They can help identify inefficiencies or any moves that weren’t ideal.
Don’t hesitate to get a second opinion. It will help you determine if you’re getting the service you deserve — and it could help preserve your retirement future.
Kim Franke-Folstad contributed to this article.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Jeff Dixson is president and CEO at Northwest Financial and Tax Solutions Inc. and is an Investment Adviser Representative and insurance professional. He hosts a weekly radio show, "The Jeff Dixson Show: The Retirement Coach," and is the author of "Winning the Retirement Game."
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published