Warning Signs of a Bad Financial Advisor P.1

A few days ago I stumbled upon this article by Suze Orman down at www.cnbc.com. The title of this blog entry is exactly the same as the one she wrote. There's no better title for it.

I think that as we start the year 2010, before you think about investing your hard earned money, know first if the person you're about to talk to can be trusted.

While her list is quite complete, not all of them may be applicable to the local setting.

Here are the warning signs -

10. They Rush You

You meet the advisor who says there’s a deadline on the investment. Suze explains, “There is NO investment out there that you have to rush in -- especially today. They are a salesperson and not a financial advisor.”

My take -

I think this is a fair statement. While you shouldn't dilly dally with investing your money, there's no need to rush either. Your money should be invested soonest, but your decision on what and where to invest shouldn't be rushed.

9. They Don’t Tell You How They're Paid

There is a cost associated with any investment that you make. It is most likely that you will pay the advisor’s fee, load or commission. The advisor needs to be clear on what it’s going to cost you.

My take -

As that hackneyed statement goes, honesty is the best policy. A financial advisor who is fully transparent with you earns brownie points. Further, you know this person can be trusted. This will also avoid any misunderstanding between you and your financial advisor. You shouldn't be shy with your questions, so fire them away!

8. They Want to Put Everything in One Investment

“Be very wary if your financial advisor wants you to put all or most of your money into one single investment. You should diversify your money…. You don’t want to put money above FDIC limits, or state guaranty limits on annuities.” - Suze

My take -

Another cliche comes to mind - Don't put all your eggs in one basket.

If you are fortunate enough to be financially well off, don't put all your money in properties only as they are highly illiquid investments. If you're just starting out, don't put all your money in stocks or stock heavy mutual funds or UITF's. You need to balance it off with some quality bonds.

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Will be back with the rest of the list in the next post. Happy Investing!