CBS News posted an article about five red flags when choosing a financial planner, based on a recent publishing from Consumer Reports judging advice and brokerage services. This is a great article for all financial planners to review. You can use this information to help educate your prospects, sharing tips for the prospects to keep in mind while they are shopping for a financial planner.
5 red flags:
- Failure to volunteer compensation.
- The planner should be upfront about compensation, upon the first meeting. How the planner is to be paid should be clear from the start.
- Pitching variable annuities upon your first meeting.
- Variable annuities carry high fees and require advanced analysis that goes beyond the scope of a first meeting.
- Focusing on proprietary (in house) funds.
- If you ask for alternatives to in house funds, the planner should provide you solid alternatives. If in house funds are still advised, the planner should provide clear rationale for the selection of in house funds over the alternatives.
- Recommending target-date funds.
- Target date funds can carry high expenses. Make sure the advisor discloses all costs associated with a recommend fund and of suggests alternatives if requested.
- Not mentioning fiduciary duty.
- Fiduciary duty is a pillar of client/advisors relationship. The advisor is required to act in your best interest, and the advisor should make this duty clear to you.
Read more about the five red flags and reasons why they are considered red flags from CBS News.
January 10th 2012
Choosing a financial planner: 5 red flags
By Farnoosh Torabi
If you are a subscriber to Consumer Reports, I would highly suggest reading the full publishing found in the February 2012 magazine.
Where to put your money
We judge advice and brokerage service at major financial companies
Or read it online: http://www.consumerreports.org/cro/2012/02/where-to-put-your-money.html