In the world of investing, there are investors who manage their investments on their own, and there are those who work together with an investment advisor, which can either be a good one or a bad investment advisor.
If you belong on the second one, it is best that you keep a close eye at the way your investments are being handled, or you might end up getting a bad investment because you were unable tell a good and a bad investment advisor apart.
So, how can you know if you are with a bad investment advisor? Identifying them is not impossible, but it could be tricky.
To do this, you will have to look for any indications that would differentiate them from the rest. Here are some of the signs:
The investment advisor is not really planning on offering investment advice
Some advisors will assure you that they will do everything, including investment advice, financial planning, tax advice, and insurance product in one single space.
Now this may sound great, but for one individual to be able to perform all of these things? That is rare, and so is finding a firm that can do it.
The advisor is not openly discussing returns
If your advisor is not willing to talk about risk-adjusted returns, then you might want to have your guard up. Given how advisors usually customize client portfolios, it may involve sharing a wide set of individual returns.
Be cautious of an advisor that is not openly speaking his/her past returns. Some of them might come up with a reason, like they have customized portfolios or they cannot offer composite return. If you hear that, then request for returns on similar portfolios.
Also, you must understand how a return was done and be very mindful of the risk taken.
The advisor is selling service, rather than returns
Some advisors might try to screen a record of poor returns in the past or the lack of a perfectly planned investment strategy by concentrating on service and guidance.
Rather than paying for high-priced assets that many advisors charge, it is better that you pay for the skills and expertise that can help you generate an excellent return on your money.
The investment advisor is willing to customize a stock portfolio for you
If an investment advisor promises you that he/she will customize an investment portfolio for you, do not fall for it.
Instead, what the advisor should actually do is customize an asset allocation for you, and then concentrate on acquiring excellent managers for each asset class.
The advisor convinces you to buy investments which he/she is personally involved
In the world of investing, there is a chance that you might end up sitting across an advisor that would either sell more funds or sell more products to you even if it is going to cost you more.
To avoid these kinds of advisors, know how your advisor gets paid. It will give you an idea if the advisor is objective or subjective, persuading you to acquire investments that are likely to cost you more and make them earn more.
Some investment advisors display these signs when dealing with a client.
If you ever find yourself working with an advisor showing any of these signs on a regular basis, then it might mean that it is time for you to find a better investment advisor.
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