Warning Signs of a Bad Financial Advisor
Lack of Fee Transparency
A trustworthy advisor should be upfront about how they are compensated. If an advisor is vague, evasive, or unwilling to explain how they’re paid, consider it a red flag. Fee structures generally fall into three categories:
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Fee-only: Advisors earn income solely from the fees clients pay, with no commissions.
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Commission-based: Advisors earn money by selling financial products, which can lead to potential conflicts of interest.
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Fee-based: A hybrid of the two, which can sometimes be confusing without full disclosure.
No Fiduciary Duty
Advisors held to a fiduciary standard are legally obligated to act in your best interest. In contrast, those held only to a suitability standard are required to recommend products that are merely “suitable”, not necessarily optimal for your situation. Always ask if your advisor is a fiduciary, and request that they confirm it in writing.
Industry Certifications and Designations
Reputable advisors typically hold respected industry certifications and designations, which demonstrate a commitment to ethical standards and continued education. Look for designations like CFP®, CFA®, CPA, or CDFA®.
Making a smart choice when selecting a financial advisor requires more than a good first impression. Be diligent in evaluating their compensation model, professional responsibilities, and qualifications to ensure you’re working with someone who truly has your best interests in mind.
Schedule a complimentary consultation and discover how our services can help you achieve financial freedom.
William Medcalf
Senior Financial Planning Associate, Wiser Wealth Management
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