It's been over 7 years since the arrest of Bernie Madoff. The mastermind of the most notorious Ponzi scheme in history.
I guess the thing that really angers me about this whole situation is the fact that he was a broker, a financial advisor. He not only betrayed his clients, colleagues and family, but he betrayed his fellow financial advisors. He damaged the credibility of good, honest financial advisors.
While most investors will never be scammed in a Ponzi Scheme, they should pay attention to a few things that perhaps you picked the wrong financial advisor.
Here are five signs you picked the wrong financial advisor:
1. Your advisor has no certifications. The very best advisors have made a commitment to their clients and themselves to be better educated. Having one of the two designations is a clear sign that they know their stuff and have pledged to be ethical. There are two comprehensive financial planning designations. They are Certified Financial Planner (CFP®) and Chartered Financial Consultant (ChFC®). They come from two different financial colleges, similar to a Harvard and Yale comparison.
2. Your advisor brags about outperforming the market. This could be a warning sign. Any advisor that needs to promote their performance numbers may not be what they seem. Wouldn’t you rather talk with an advisor that brags about helping clients reach their financial dreams? You also have to consider just how this advisor manages to outperform the market. Is he taking too much risk?
3. Your advisor never asks about your financial or personal goals. I’m really surprised by the number of people that just blindly give their hard-earned money to a person that never asks about what’s important to them. How can you possibly invest money without knowing what it’s for? If a financial advisor isn’t asking questions about your life and your dreams, then your money is more important to him than your financial success.
4. Your advisor’s money management style makes you uncomfortable. I will tell you from experience that every financial advisor does things a bit different. We are all human and have biases toward certain investments and strategies. The key here is making sure that you are completely comfortable with the way your advisor manages your investments. If you have that sinking feeling, you might want to seek a new financial advisor.
5. Your advisor doesn’t place your interests first. The word fiduciary gets thrown around a lot these days. A fiduciary is someone that is trusted with another persons money. It’s really that simple. When a financial advisor doesn’t listen to what you are telling him, or ignores your concerns about investment risk, you may have the wrong financial advisor. It’s your money. You deserve a fiduciary that places your needs first.
Pay attention to the signs. There were signs that Bernie Madoff gave off. People just chose to ignore them. If your financial advisor is doing several or all of these, then it’s time to find a new one. If you like my articles, why not subscribe for free right here?