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Financial Advisor Warning Signs

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Is Your Financial Advisor on Your Side? Here are 5 Warning Signs that Indicate the Answer Might Be “No”


Here at AgingOptions we frequently get asked the questions, “Should I use the services of a financial planner? And if so, how do I find the right one for me?” What people really seem to be asking is, “Where can I get advice I can trust, without falling prey to someone’s hidden agenda?” In these days of market turbulence and increasing fiscal confusion, people are desperate for good, honest, objective recommendations – but where can they find it?


We’ll give you our perspective on that question in just a moment, but first we want to call your attention to this eye-opening article published last year on the Money website of US News. Even though the article came out some time back, the topic is still fresh, which is why the title really caught our eye: it’s called 5 Signs Your Financial Advisor is Working Against You.  “Sometimes,” warns US News, “the person you hired to help you get ahead is the one putting hurdles in your way.”


Charting Your Financial Future


More and more people seem to be relying on financial advisors of one variety or another to help them chart their financial future. According to a survey done by the Certified Financial Planner Board of Standards, in 2010 about 28 percent of Americans used the services of a financial advisor – but by 2015 that number had risen to 40 percent. What accounts for this dramatic rise?  “Many people do not feel they have enough hours in the day,” says the article, “or the technical expertise to manage keeping up with the rapidly changing financial landscape.” People these days also seem more worried about the financial security of their family – it’s “a weight (that) becomes even heavier when you begin to wonder what happens to those you love when you are no longer around to steer the financial ship.”


But the truth is that “not all financial professionals can be trusted to help with the decision-making process, and some actually work against the best interests of those seeking guidance,” warns US News. Just because someone has a long list of credentials after his or her name doesn’t mean they’re going to act in your best interests, which means you need to be a smart consumer – after all, your financial future could be at stake. The US News article lists these five “suspicious circumstances” that may suggest it’s time for you to seek out a second, more objective opinion.


Yellow Flags and Warning Signs


The first yellow flag, says the US News article (which was co-written by two fee-only financial planners) is if your planner recommends an annuity inside an individual retirement account. We don’t want to go into too much detail because the topic of annuities can be complex (we encourage you to contact us at AgingOptions so we can help you get thorough advice about annuities or any other financial topic).  But in the view of the article’s authors, planners who suggest an annuity inside an IRA are forcing you to pay for an unnecessary layer of annuity fees without gaining you any additional tax benefits. Annuities in an IRA, say the authors, are less cost-effective and more expensive, and if your planner suggests this strategy he or she may be lining their pockets with extra fees at your expense.


A second warning area is recommending high-risk strategies – higher than your situation suggests. For example, says US News, “If your advisor recommends mortgaging a paid-off home so you can invest in more insurance and financial products, get a second opinion. There is a conflict of interest when advisors encourage clients to increase their debt, often resulting in a large commission check for the advisor and higher ongoing fees for the client.”


The third caution is if your advisor starts pushing insurance products you don’t need. “It should be concerning if every solution or proposal that your advisor puts forward involves insurance or annuity products,” the article says. These products aren’t necessarily bad in themselves, but they are expensive and often force you to lock up your money for years, even decades. And remember, your planner is earning commissions every time you purchase one of these costly and potentially restrictive products.


Too Much Churn, Too Little Attention


The fourth practice that should set off alarm bells is when your planner engages in a practice called churning. “Churning,” says US News,” is when a broker engages in excessive buying and selling of securities in a customer’s account chiefly to generate commissions that benefit the broker.” It’s not unusual for advisors to recommend a financial product and then turn around a year or so later and suggest another, forcing the client to pay commissions and sometimes costly surrender fees. “Sometimes the only person making money on these transactions is the person who is selling the product,” says the article.


Finally, it may be time for a second opinion (or a new advisor) if you sense your portfolio is being neglected – in other words, if your advisor is guilty of errors of omission. This is the opposite of churn: instead of too many fee-generating transactions, some planners are guilty of too few.  “Portfolio monitoring, rebalancing and investment review are all parts of a sound investment management process,” says US News. “If your portfolio is comprised of the top-rated investment funds or best performers from 1999, there might be no reason to continue to hold those specific investments today.” Time for a fresh look!


High Commissions can mean Conflict of Interest


All this is good advice. Our suggestion remains the same as it has always been: you are generally better off, and more likely to get good, objective financial advice if you deal with a fee-based planner, not someone with a product to sell. Contact us at AgingOptions and we can steer you toward reputable planners in your area. But don’t forget this: a financial plan alone is hardly enough to get you safely into and through your retirement years. In fact, relying on a financial plan all by itself is a recipe for disaster. As soon as an unplanned medical emergency arises, you’ll need a medical plan – which will likely force you to make a new housing choice, which necessitates a housing plan. In the midst of all this emergency planning, legal issues are bound to arise, so you’re going to need a legal plan. And finally, will your family understand and support your desires? A family communication plan will become essential if you want to avoid being forced into a nursing home against your wishes and keep from being a burden to your loved ones.


Only one form of retirement planning encompasses all these elements: financial, medical, housing, legal and family. It’s an AgingOptions LifePlan, and if this sounds like a true retirement breakthrough, it is. Why not take the time to find out more? Plan now to attend a free LifePlanning Seminar in a location near you. We have several choices of dates and locations so click here for details and online registration, or call us during the week for assistance. Bring your retirement questions, and we’ll answer them at a LifePlanning Seminar!


(originally reported at

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