Here are some common (and not so common) tips and “Red Flags” to look for in researching financial advisors, insurance agents and financial services companies including insurance companies:
Financial Fraud can happen to anyone. Always trust your instincts and remember the adage – if it sounds too good to be true, then it is probably is too good to be true. Keep in mind that it is recommended that you only work with an Advisor and Financial Service Company who adheres to GET READY! Financial Standards.
The best way to protect yourself from financial fraud is to research the advisor and company you’re considering.
Confirm that both the advisor and company are properly licensed for the services and products they provide in your state. Use the Financial Advisor Research Checklist to help with your research.
You should understand the long-term nature of your purchase. If you are purchasing a financial product with a surrender charge and slow initial accumulation period such as an annuity or cash value/permanent life insurance policy, be sure you plan to keep it long enough so the charges don’t take too much of the money you invest.
- Find out if the advisor has experience with the financial products you need. If you are opening an IRA, you would most likely not want the next person available at your bank who just graduated from college.
- Be wary of any limited-time deals especially those that you make you uncomfortable, where you have to sign up immediately and don’t have time to think about it or do your own research
- Don’t let the advisor “isolate” you on making a decision and keep you from talking to your spouse or other family members, friends or advisors.
- Don’t give out any personal information like your Social Security Numbers or bank information over the phone until you have verified the legitimacy of the advisor and company with the appropriate regulatory body such as the SEC & FINRA for investments and your state’s insurance department for insurance.
- Ask for copies of all of the paperwork you sign and keep a copy of the payment receipt or check for the initial premium payment you gave the agent for the policy.
- Always review any contracts, agreements, insurance policies and illustrations or projections carefully.
- Ask your advisor and/or the company for an explanation of anything you don’t understand.
- Verify that the advisor and financial company are licensed. In order to sell financial products, companies and advisors must be properly licensed. To confirm licensing, check with the appropriate regulatory body. For help with finding the appropriate regulatory agency and website links, check out Financial Regulatory Agencies.
- The proof is in the paperwork. As you complete your research and decide to purchase a particular product, it’s important to keep detailed records. Get all rate quotes and key information in writing. Once you’ve made a purchase, keep a copy of all paperwork you complete and sign, as well as any correspondence, special offers and payment receipts.
- Ask for the names of other clients with whom you can discuss the advisor’s services. (Be careful if the advisor only gives you one or two names since the advisor may have selected these people to give you rave reviews on their performance.) To learn more, take a look at: Financial Advisor Research Checklist.
- Contact the financial service company directly, if you don’t receive a confirmation and documentation within a reasonable amount of time.
- Upon receipt of confirmation and/or documentation for a new financial product, review to make sure it matches what you signed up for.
Bad advisors are not always bad people. They may have great personalities and are extremely like-able. Unfortunately, these character traits have nothing to do with competence or ethics. The most dangerous advisors are like-able and they possess exceptional sales skills. They are very skilled at convincing consumers that they will put the consumer’s financial interests first.