I have recently found out how terrible whole life insurance policies are. My fiancé and I have been using a financial advisor that my sister recommended . He worked for a big well known company so I naively assumed that I could trust him.
We had been giving him and his company money for both investments and life insurance policies because we trusted him. I want to find an advisor that I can actually trust. Is there a reliable way to do this? Are there any other pitfalls I should be aware of? I feel like I have been swindled out of thousands of dollars and don’t want this to happen again.
How do you find a trustworthy financial advisor?
byu/kaidoi2 inpersonalfinance
Posted by kaidoi2
11 Comments
Why do you feel you need a financial advisor at all?
If you insist on one, first step is to verify they are a fiduciary and CFP. Gold standard for financial advising, IMO. You could also consider a fee-only option where you pay for advice but they don’t directly handle your money.
Why do you think you need a financial advisor? Most folks don’t.
I would find someone to write you a plan and give your portfolio a review. But there’s really no reason to pay an advisor on a recurring basis unless you have a special circumstance.
You can trust yourself best of all. Even the most trustworthy financial advisor will only spend minutes a year understanding your individual circumstances. You have to do the heavy lifting by understanding the financial landscape and setting priorities that are best for you.
For example, most naive investors will tell their advisor that they want safety to be priority one, without realizing that this means they earn 3% rather than 10% average rate of return. It’s your job to realize that you really can sholder a little risk in exchange for significantly improved returns.
the reality is that you don’t need one. you shouldn’t blindly trust anyone with your finances. a financial advisor is only really useful if you have huge sums of money or complicated assets. for 95% of people you can just do it yourself. this isn’t something you want to be blind about.
Do you have a lower net worth than when you started? If your net worth is increasing, then your financial advisor is doing their job. A licensed FA can’t outright scam you out of your money. Often times, people sit on their money (stuffing their money under their mattress) and lose out on the real value of their money. If these people go to a financial advisor, then they make more money that they otherwise would have.
Of course, doing everything yourself is the cheapest option which would lead to the highest returns. But this is like the question of, “Do I hire a plumber or do I try to do it myself?” Sure, you can do everything a plumber could do and get to be as good as a professional plumber is… but is the time spent worth it to you?
But it sounds like you feel scammed, which basically comes down to that you don’t feel that your needs were adequately met by this FA. Which is fine. I think what you need to do next then is to educate yourself on what you want from your FA, then find a FA who can offer you what you want.
Make sure they’re a fiduciary. A fiduciary has a duty to act in your best interests.
Sounds like that guy is an insurance salesman and not a financial advisor. Unless you have many millions you probably can handle your own finances.
Don’t waste any money on whole life insurance. Look into term life instead.
Ask rich people. Or at least people who make a lot of money that you know.
And ignore these people saying you don’t need one. They don’t understand that some people dont want to learn all of this junk.
I think that’s about as tough as finding a trustworthy plumber, roofing company, car dealership, etc.
By that, I mean trust is an arbitrary concept, and there isn’t a sure-fire way to vet anyone from any industry perfectly. It’s a lot of gut feeling, hearing others first-hand accounts, and researching reviews.
I’d pitch, interview 2-3 potential advisors (if you think you really need one, I see a lot of comments saying just don’t have one, but I recognize you could have a good reason for wanting one) be honest and fourth coming about your concerns from your current/previous advisor. It may also be a good idea to sit on the decision for a couple of weeks – find out if any of the new potential options are too pushy about making you a client.
Money is one of the most important things in life. You should try to learn every thing possible about money and how to invest it correctly. You need to learn more about money than any financial advisor would know.
you don’t
but if you REALLY do (8 figures or above), you pay them a fee for their time, not a percentage of assets