60% of Americans say trust matters most in a financial advisor — here are the red flags you're missing

Tara Losinski

5 min read

With every relationship there comes a time for you to decide whether it’s really working — and it’s no different when it comes to the partnership you have with your financial advisor.

You might assume that portfolio performance ranks first among reasons clients choose to stay with their advisors, but not so, findings show. According to research from Morningstar, the top three reasons are discomfort in handling financial issues, quality of financial advice received and behavioral coaching provided — with return performance ranking fourth. (1)

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That’s not to say, however, that performance shouldn’t factor into your decision. But experts say it’s not the only thing you should consider.

Here are signs it might be time for a new financial advisor — plus the question you should ask yourself first.

You don’t feel you’re getting your money’s worth

It’s important that you feel the service you get matches the fee you pay for it. You can start by looking at performance, comparing your rate of return against benchmarks like the S&P 500 (with an average annual return of 10.4%, for example. (2)

But more importantly, you should feel confident that your advisor will keep you on track to reach your financial goals, reviewing and rebalancing your portfolio as needed.

And don’t discount intangibles like the stress and anxiety a financial pro can help alleviate. As Morningstar’s research showed, people stay with advisors they feel will support and mentor them along their financial journey.

“Fees should reflect the level of service, coordination and guidance you’re receiving,” Nicole Carlon, a certified financial planner at WiseOak Wealth, told MarketWatch, “not just investment returns.” (3) If you’re paying 1% and you’re only hearing from your advisor once a year to wish you a happy birthday, you may not be getting your money’s worth.

You don’t think of trustworthiness as one of their best traits

According to data from YouGov, 60% of Americans prioritize trustworthiness above all else when it comes to choosing a financial advisor. (4) It’s not surprising, of course, as it is your hard-earned money with which you trust them. Incidentally, cost of service ranked second-most important, while historical performance is down in the fifth spot.

Ideally, you should check out your advisor’s profile on the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck (5) before you go ahead and sign on with them. However, there’s no time like the present. The site will provide you an overview of a broker’s employment history, including regulatory violations and complaints — obvious red flags.

FINRA also recommends you watch out for these five behaviors from your advisor: (6)

Asking for a personal loan
Trying to sell you a promissory note (a form of debt used to raise money but marketed almost exclusively to corporate and accredited investors)
Using their personal email, text or social media to communicate with you
Asking you to transfer funds to a person or entity other than their firm
Requesting to become a beneficiary, which, with rare exceptions, is prohibited for registered financial professionals as it can create a conflict of interest

If you experience these or recognize any shady business by your advisor, report it to FINRA. And, look for a new advisor.

Would you recommend your financial advisor?

If you’re not sure what you think about your financial advisor, ask yourself whether you’d hand their card to family, friends or even coworkers. If not, it could be a sign that it’s time to move on. But first, consider that the problem might be you — not them.

“Look at yourself in the mirror and ask if you caused the problem,” Elias Friedman, founder and senior wealth advisor at Kadima Wealth, told MarketWatch. (3) “Not saving enough or early enough, or not returning an adviser’s calls or emails, is not an excuse for not reaching your financial goals in life.”

Financial advisors are neither magicians, nor mind readers. If you’re concerned about portfolio performance — or your financial needs or goals change — it’s up to you to communicate that to them. If they’re unresponsive, however, that’s a legitimate red flag.

Just remember, no matter how much you like your financial advisor as a person, if they’re not keeping you on track to reach your financial goals, it’s time to find another pro who will.

60% of Americans say trust matters most in a financial advisor — here are the red flags you’re missing

Must Read

You don’t feel you’re getting your money’s worth

You don’t think of trustworthiness as one of their best traits

Would you recommend your financial advisor?

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