Most people dread the thought of leaving their financial adviser. Even if you don't have a particularly good relationship with them, they may have been handling your investments and other assets for years. Moving everything over to another firm can be difficult and time-consuming. You may also just not want the confrontation.
However, there are some red flags that you shouldn't ignore. They can be signs that your adviser is less than honest and maybe even acting illegally. Let's look at a few.
- Your adviser isn't upfront about their compensation. Some are fee-based. Others earn a commission. Some earn their money through a combination of the two. You should know which of those is the case for your adviser as well as whether they charge by the hour or get a flat fee.
- Their communication is poor or inconsistent. You should typically receive a reply to any communication within one business day. You certainly shouldn't have to wait for more than a few days or even weeks. If your adviser doesn't have time for you or if you're far down on their list of priorities, you owe it to yourself to go where your business is appreciated.
- Your portfolio's performance isn't reflecting that of the overall market. Certainly, markets have good years and bad years. However, if you're losing money while the market is performing well, you should find out why. If your adviser doesn't have a good explanation (like perhaps you insisted on investing in a startup that tanked), at least talk to another adviser.
- You see signs of potentially illegal behavior. These can include not receiving statements, guarantees of good returns and being asked to make your payments to the adviser rather than their firm.
If you suspect that you may have cause for legal action against your adviser, it's wise to talk with an experienced attorney. They can advise you whether you have a case and discuss your various options with you.