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4 Major Red Flags that Could Spell Trouble with a Financial Planner in the Years Before Retirement

By Sixty and Me April 17, 2020 Managing Money

When we are in our 20s and 30s, most of us take a pretty random approach to managing our money (or not managing it as the case may be.) But, the older we get, the more we realize that we need unbiased, professional financial advice to prepare for retirement.

Of course, not all financial planners are created equal. While most are ethical, skilled and well-intentioned, not all of them have what it takes to really help us reach our retirement goals.

To help us dig into this issue, I recently sat down with financial expert, Pam Krueger. As the creator of MoneyTrack, Pam has the background necessary to help us cut through the noise when it comes to choosing a financial planner.

So, I hope you will join Pam and me as we discuss 4 red flags that could spell trouble with your financial planner… especially in the years leading up to retirement.

I hope that you enjoy today’s discussion! Here are 4 red flags that could spell trouble with a financial planner.

Red Flag #1: Your First Meeting Starts with a Sales Presentation

If the first thing a potential financial advisor does is show you a presentation about an investment methodology – or worse, specific investment vehicles – Pam says “Run!”

According to Pam, the first thing that a financial advisor should do it get to know you and your unique financial needs better. As she said, “It’s about you… it’s not about someone who met you 5 minutes ago assuming that they know what is right for you and wowing you with graphs and charts.”

I couldn’t agree more!

You Feel Pressured to “Act Now”

Few decisions are as important as the ones that you make about your financial life. You may have spent decades building up your savings. Why on Earth would anyone pressure you to make a decision right away?

According to Pam, high-pressure selling, often combined with a slick presentation, is a big red flag when it comes to choosing a financial advisor. This is especially true for older adults, who tend to have more at stake than their younger counterparts.

The right approach, according to Pam, is to put the client first. As she said, “Different, looks like this… you walk in. You sit down. And, there’s no hurry. And, they want to know all about you.”

The Financial Advisor Can’t (or Won’t) Put a Fiduciary Oath in Writing

Many people don’t realize that many financial advisors don’t have a legal obligation to put your needs above their own. Instead, they are required to recommend financial vehicles that are “appropriate” for your situation.

This leaves the door open to massive conflicts of interest, including being able to receive commissions for recommending specific products.

According to Pam, a financial advisor who won’t put a fiduciary oath in writing shouldn’t call themselves financial advisors… they are sales people or insurance brokers. As she said during our conversation, “There’s nothing wrong with being a sales person… just flippin’ call yourself a sales person. Stop calling yourself an advisor, if you can’t sign a fiduciary oath. It’s just that clear!”

They Won’t Be Clear with You About the Sources of Their Compensation

The final red flag that Pam and I discussed related to compensation. Specifically, unless a financial advisor is a fiduciary, it is very likely that a large percentage of their overall compensation comes from commissions that they receive from companies to push specific products. And, of course, the companies paying these fees wouldn’t give out their money unless they thought that they were going to make a profit by getting you as a customer. This can lead to higher fees or underperforming assets.

So, don’t be shy to really dig into how your financial advisor (or someone that you are considering working with for the first time) is compensated. Ideally, you should be the only one paying for their time so that they are incentivized to put your needs first.

I hope that you found this video useful!

What do you think are the biggest red flags to be aware of when you are talking with a financial advisor? Let’s have a conversation!

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The Author

Sixty and Me is a community of over 500,000 women over 60 founded by Margaret Manning. Our editorial team publishes articles on lifestyle topics including fashion, dating, retirement and money.

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