Warning Signs to be Aware of and
Questions to Ask While Selecting the Right Investment Advisor
You need to invest in financial products which provide you highest returns, help you accomplish your financial goals and at the same time are safe to invest in. To fulfill these goals you need to appoint an investment advisor so that you can get the best advice according to your risk profile and investment horizon. However, you need to be aware of some of the warning signs which will tell you that you are not working with the right advisor. Additionally, it will be necessary for you to ask necessary questions to be sure the person is competent enough to manage your finances. As such, these are the topics we will be looking into in the following sections.
Selecting an Investment Advisor and Warning Signs to be Aware of
If you notice the undermentioned warning signs then you need to stay alert about the integrity or qualification of a particular investment advisor you plan to work with.
- The advisor recommends liquidation of a substantial part or all of your portfolio and investing the proceeds received from liquidation into one product (which is most often a annuity product since they get good commission on such products).
- They do not spend time to explore your personal risk preferences and needs.
- The investment advisor firm tells you that a particular investment product is available only through them. If it is true, then it will be difficult for you to cash out such investment.
- You are provided a contract according to which they will get a certain share from profits you make (not losses!).
- The firm is focused on one particular stream of finance with lack of knowledge in wide spectrum of investment products.
- The investment advisor seems reluctant to divulge information about the way fees is received or how advisor earns money (as for instance, whether the advisor receives commissions or bonuses for sale of any particular investment product).
- You are asked to make an advance payment for services advisor will be providing or told to provide a check in advisor's name instead of the institution or organization, whose products you want to invest in.
- Investment advisor promises quite unrealistic returns for a particular investment product and claims it to be perfectly safe.
Questions to Ask
The following questions will help you understand how competent an investment advisor is:
- What is your qualification? Ask about the qualification advisor has and whether the person can show certification he has. Additionally, verify authenticity of such qualification with the institution that provides such certification.
- What are the ways by which you earn money? Ideally, you should look for a person who gets fee based income. Even if it is fee based, you need to check whether the person also receives a commission or not. Receiving a commission is not a concern if you are informed about what actually happens.
A Final Note
We will conclude here with a final note that investing in appropriate financial products can be a challenge if you do not have the required knowledge and expertise. You can reduce some of the complexities by utilizing services of an investment advisor while at the same time improving your knowledge of the subject.