In the January and February articles of this year, I introduced you to what to look for in a financial planner. On March 11, the Colorado Springs Gazette published an article that pointed out the downside of picking the wrong one.The article, written by Dennis Huspeni, was titled, “You really can’t believe everything you hear Radio’s ‘Trusted Financial Advisor’ quite the opposite.” The article concerns a “trusted financial advisor” who took advantage of the uneducated and unknowing.”The Advisor” was found guilty of fraud, breach of contract, deceptive trade practices and bad faith. Jurors awarded the plaintiff $132,620 for the $50,000 he lost plus damages. The award was automatically tripled to just under $400,000 because the jurors found the fraud was accompanied by “bad faith.” The defendant was also ordered to pay the plaintiff’s attorney’s fees.This cannot be said any stronger: Know with whom you are dealing before you put your hard-earned money at risk!Here are the questions that you must be asking, at a minimum:
- How long have they been providing financial services professionally?
- What licenses do they carry?
- What professional education have they completed?
- Do they currently have industry credentials that can be checked for complaints or problems with other clients?
- Do they “company hop” every year or so?
- What other professionals do they currently work with who would be comfortable referring back to them?
- How are they paid? Fee based or commission?
- Identify services to be provided
- Compensation arrangements
- Responsibilities of client and advisor
- Duration of the arrangement
- Any additional information that will further define or limit the scope of the engagement
- If the advisor is a registered investment advisor representative and/or a CERTIFIED FINANCIAL PLANNER(tm) professional, additional disclosures statements should be forthcoming.
