Part 2 of the The Never-Do List – 22 Good Ways to Avoid Financial Advisor and Investment Counselor Frauds and Scams This article discusses things that you should “never do” with a financial planner or investment advisor, and it covers fees, payments, and proprietary investments.
You should never do certain things with a financial planning or investment adviser. This “never-do” list cannot guarantee that you avoid problems with an adviser. However, it could help to reduce substantially the chances of experiencing problems, financial frauds, and investment scams.
The Skilled Investor’s list of “never-dos” with an adviser has been split into several articles. For other articles see,
Avoiding financial planning and investment advisor frauds and scams – Overview 22 Good Ways to Avoid Financial Advisor Frauds and Scams – Part 1 22 Good Ways to Avoid Financial Advisor Frauds and Scams – Part 3
Many of the items listed are either illegal or widely viewed as unethical. However, legality or ethics will not stop a crook. Others of these practices are legitimate and frequently encountered in the advisory industry, but they are potentially subject to abuse. If an advisor suggests listed items, you should have heightened concern, and you should not ignore the matter. If the adviser does not have a good explanation and you remain uncomfortable, find another adviser.
Financial Planner and Investment Counselor Fees
NEVER share investment profits or capital gains with your advisor.
You will never find an advisor who is willing to share in your losses, so why share in your gains? Only more wealthy “accredited” investors who sign documents asserting that they meet certain minimum asset and/or income levels can legally enter into investments that allow profit sharing with others.1 These accredited investors are presumed to be more well-informed investors who can properly assess risky investments. However, it is doubtful whether some accredited individual investors are sufficiently able to assess certain investment risks.
NEVER pay excessive asset management fees.
Before you pay even competitively priced asset management fees be certain that you will receive justifiable value in exchange. Always compare asset management fees with the alternative of paying competitive hourly fees. Your assets represent your hard-earned money. The value of an advisory service should be evaluated in relation to the long-term net returns performance of your assets and not just the total amount of gross assets you possess.
See this article: Excessive costs are a huge [...]