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Date: November 16, 2020

10 Warning Signs You’ve Got the Wrong Financial Advisor

For a lot of people, 2021 is the year they pledge to finally get their finances together and work with a financial advisor. At Watts Gwilliam and Company, we’re excited about this New Year’s resolution, but want to remind you that not all financial advisors are the same. In fact, there is no prerequisite to use the title – not even a high school diploma! So, before you choose to work with the first name who comes up in a Google search, I encourage you to do your homework!

This should also be the case if you’re currently working with a financial advisor but feel it’s time to make a change – 2020 shed light on a lot of things!

To help in your search, there are 3 important characteristics that the best financial advisors have:

  • A fiduciary code of conduct
  • A fee-only compensation model
  • Independent advice

On the flip side, there are many characteristics that you should avoid! Red flags can be hard to spot, not just for first-time investors but even by a seasoned professional. If a financial advisor does not possess the above traits, you may simply be talking to a salesperson, and likely, he or she will have a slick pitch for you. A common strategy is to win you over with a good personality or impressive promises. Beware!

Red flags are also often glossed over when you select a financial advisor based purely on a recommendation (you never know if the financial advisor who works for your coworker has the right expertise to also help you). Another thing to consider is people may be happy to share their financial success stories with you, but they tend to leave out the mistakes.

Before you choose a financial advisor to work with, review our 10 warning signs that you might be talking to the wrong financial advisor. Working with the wrong advisor is a financial planning mistake we see many people make. It can be harder to help clients recover from a costly mistake than it would have been to put them on the right path initially.

 

Ready to enlist a professional to help with your financial planning needs? Contact Watts Gwilliam and Company to see if we’re the right fit for you.

 

Warning Sign #1: They Urge You to Act Fast 

The wrong financial advisor will rush you to make decisions. They’ll often give you a five-minute sales pitch, then say you’ll miss out on the opportunity of a lifetime if you don’t act now.

When it comes to saving for your future, rushing isn’t the answer. In fact, the last thing you want to do is make a financial decision on a whim, only to find out it wasn’t the right move later on.

The right advisor will give you the time and space you need to make an educated decision. They’ll encourage you to explore your options to ensure you’re making the right choice.

Warning Sign #2: They Promise Returns and Success

If something sounds too good to be true, then it typically is! Plain and simple. Even the Wolf of Wall Street can’t promise astronomical returns with zero risk. If an advisor tries to convince you otherwise, don’t buy into it.

A good financial advisor will set expectations with you from the very beginning. They’ll tell you that while having a comprehensive financial plan gives you the highest chance of reaching your goals, nothing is guaranteed (and nothing is without risk). Instead, they’ll monitor your progress and adjust your plan as needed to ensure you meet your targets.

Warning Sign #3: They Have a ‘Special’ Plan for the ‘Best’ Clients

Advisors should not have “special” plans reserved for their “best” clients. Who are their “best” clients anyway? This should be a big red flag, one that aims to get you to act fast. And remember, that’s not a good idea when it comes to your financial future.

The right advisor uses the same approach with all their clients: They get to know you first, then they build a comprehensive financial plan that addresses your concerns and helps you reach your goals.

Warning Sign #4: They’re Not a Fiduciary 

If there’s one single thing your advisor should be, it’s a fiduciary. Working with a fiduciary advisor ensures you’re getting the highest level of care possible because they:

  • Always put your needs first
  • Are legally and ethically obligated to work in your best interest
  • Disclose any conflicts of interest to you upfront

Watts Gwilliam and Company is a fee-only, fiduciary financial advisory firm headquartered in Gilbert, Arizona that serves investors nationwide. Our firm was established to provide a conflict-free environment that’s dedicated to your success. We provide innovative investment and financial planning strategies so you can build wealth, generate income and secure your future. For more on what this looks like, click here.

Warning Sign #5: They Have a Commission-Based Fee Structure

Financial advisors get paid all types of ways – commission, fee-only, a combination of the two, etc. The best advisors are fee-only, meaning they get paid a flat fee.

That said, beware of any advisor who works on commission. This type of fee structure can breed conflicts of interest and can encourage a “financial advisor” to pressure you into choosing a proprietary product that will pad their bottom line, which isn’t acting in your best interest.

Warning Sign #6: They Don’t Have the Right Experience

You’d think a financial advisor’s areas of expertise would be a top priority, but it’s often just an afterthought, especially for those hiring a financial advisor based on a recommendation.

If you’re concerned about how a divorce will affect your retirement plan, for example, it’s important to make sure your financial advisor understands the affects this can have on your financial plan. If you’re a professional athlete, does your financial advisor have experience working with those in the sports industry? There are unique issues that can surface, such as a shortened career or work after “retirement.” Even your location can be important – financial planning in Arizona, for instance, is different than in other areas.

Another important question is whether you’re working with an established firm.

Watts Gwilliam and Company has been helping clients with their financial needs since 2004, and our team of advisors has been in the business since the late-1990s. We have experienced bull markets, bear markets, low interest rates, high interest rates, pandemics, Democratic presidents, Republican presidents – the list goes on.

As many investors learned in 2020, experience is important!

Warning Sign #7: They Won’t Give Claims in Writing

An advisor may verbally say they’re a fiduciary, but if they aren’t willing to put it in writing, be wary.

The best advisors back-up their claims in writing when you ask them to. They’re clear about any potential conflicts of interest, and they tell you how they’re paid upfront.

If they don’t disclose this information from the get-go, take it as a sign.

Warning Sign #8: They Don’t Return Your Calls or Emails 

Can you talk to your advisor by phone, email or in-person when you need to? Or are they almost impossible to get a hold of?

Your financial advisor should communicate with you on a regular basis. This is especially true during times of crisis.

If your advisor hasn’t helped put your financial concerns to rest during the Coronavirus pandemic, what’s going to happen when you need help managing withdrawals or dealing with an unexpected emergency in retirement?

Warning Sign #9: They Don’t Understand Your Needs

Good financial advisors ask questions. From the moment both of you meet, they’re eager to learn more about your risk tolerance, goals, needs, income, expenses and concerns.

If they jump straight into pushing products or investments, they may not have your best interest at heart. Likewise, their advice could end up doing you more harm than good.

The best financial advisors aim to fully understand your needs first. Then they make suggestions.

Warning Sign #10: They Can’t Break Complex Topics into Plain Language

Do you ever ask your advisor a question, then scratch your head as you struggle to understand their response? Maybe you want to know how to leverage Rule 72t for an early retirement or what would happen if your estate passed through probate. Whatever it is, your financial advisor should be able to explain even the most complex topics in a way you understand.

If a financial advisor leaves you feeling confused or belittled, it’s time to move on. The right advisor will explain things in a way that makes sense to you. They’ll arm you with the knowledge and tools you need to make smart decisions with your money.

Looking for a New Advisor You Can Trust?

Entrusting your financial future to someone is a big deal. You’ve worked hard to accumulate your wealth, and you deserve nothing less than the best.

If you come across any of the warning signs above in your search for a new advisor in 2021, you owe it to yourself to look elsewhere. At Watts Gwilliam and Company, we’re fiduciary financial advisors who specialize in creating comprehensive financial plans. Schedule a no-obligation conversation with us to find out if our firm is a good fit for your needs. There’s no pressure, no gimmicks. Just a casual conversation to see if we can help.

Watts Gwilliam retirement eBook

David Watts
Author:

David Watts

Dave is one of the firm’s founders. He helps business owners, professional athletes, and other high-net worth clients develop and implement financial plans and strategies. He also specializes in helping those with single-stock positions to diversify and manage their financial lives. Other areas of specialty are wealth transfer plans for concentrated stockholders and business owners; tax minimization strategies for those with employee stock options; cash flow management; and risk management planning.