Dos and Don’ts When Dealing with Financial Advisors

• Don’t blindly accept the advisor’s conclusions or recommendations. Always think for yourself.
• Do communicate with advisor by email. This provides a record of the information exchange. If the advisor’s advice or statements are misleading or inaccurate, this will help you to take remedial action.
• Don’t be bullied into a decision. Make the final decisions yourself, and ensure you feel comfortable with them.
• Do collect all information needed to help you make an investment decision.
• Don’t allow the advisor to create a sense of urgency. This is a typical ploy to get you to jump into an investment without thinking of all the implications. There is a difference between bold and hasty. Bold may be part of your strategy—hasty never will be.
• Do walk away if you feel uncomfortable, for whatever reason, and seek the services of someone else. There are many service providers in this field, so you should have no trouble identifying more candidates. Always keep in mind that finding the right advisor is one of the best investments you will make—shopping carefully for the right one is time very well-spent.
• Don’t allow the advisor to talk you into lowering your defenses on the grounds of convenience or speed of execution.
• Do ensure all your assets are titled under your name or the name of a corporate or legal entity you own.
• Don’t accept unsolicited calls, mail, or e-mail from people selling investment products or services.
• Do insist on having transparent access at all times to your overall portfolio and all individual investments. Insist on having all account documents sent directly to your address, and never to the personal address of the advisor.
• Don’t give your advisor blank checks.
• Do periodically compare the advisor’s fees to market norms and ensure you are not overpaying.
• Don’t give the advisor power of attorney. Maintain control of all legal sign-offs.
• Do try to set up an arrangement in which you withhold some fees until a proportion of the required services has been rendered. This allows you to ensure your requested actions are being carried out, and protects you partially in the event you have concerns about the quality of services received.
• Don’t give money to an advisor until you’ve satisfactorily performed all necessary background checks.
• Do insist on a contract, which includes specification of all fees.
• Don’t give your advisor any ownership of your assets.
• Do insist on an exit clause in your advisory services contract, which allows you to take your assets and go elsewhere at any time and for any reason.
• Don’t be intimidated by advisors. They may know more than you about how the financial services industry works, but they likely know little more than you about which investments will be winners—and they definitely do not know more about your financial goals than you do.
• Do remember at all times that if something seems too good to be true, it usually is! There’s no free lunch on Wall Street.
• Don’t make checks or any other financial transfers directly payable to the advisor.
• Do maintain control of your assets and avoid giving the advisor free rein to initiate trades without your approval. Some advisors may insist they need control to sell a deteriorating asset quickly and avoid losses. This is more relevant for active investors. As a passive investor, you will not be engaging in emergency sales.
• Don’t put all your eggs in one basket. Consider splitting assets among more than one advisor.
• Don’t ignore suspicions if they arise. Work to resolve them as soon as possible.

You can download a pdf file of this list here.

A good advisor will respect your inclination to follow these suggestions, and will provide information that speeds up the process. The willingness of an advisor to submit to your rigorous checks is a point in her favor.

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