Improve Your Sleep

By Mark Folgmann

I was recently reminded how troublesome it is to get financial advice. Over the last several months we have had numerous calls from individuals looking for second opinions regarding their financial future. People are looking for someone to advise them on a fiduciary basis with full disclosure and without any conflicts of interest. Most of these potential clients decided to look for a new advisor because they did not feel they were well represented over the last two years as we watched the market collapse and recover. After deciding to work with us, one of our new clients arrived for his appointment and shared with me a dream he had a few nights earlier. He said that he woke up in a cold sweat because he had arrived for his scheduled appointment and the office was empty; no furniture, no phones, no people; just an empty space. For a moment we laughed and joked about it but then I started to think about this concern; it was in fact a legitimate concern.
Every day I read in trade publications about advisors all over the country going to jail for stealing client’s money and spending it on their own lifestyles. How does the average person ensure their money is safeguarded and not in a position to be used by their advisors? There are distinct advantages to working with a truly independent advisor who does not sell products and acts in the client's best interest but regardless you also must know how to safeguard your money. The top 5 tips for safeguarding your money when selecting and using an independent advisor are:
#1. Use an advisor that will accept fiduciary responsibility in writing. This alone will not protect you but will be a good first step... remember criminals still carry guns even though it may be illegal. At the very least this will eliminate the salespeople who will not agree to act in your best interest before their own.
#2. Review their ADV Part II which will introduce you to their firm and the services they provide. Get a service contract that explains the scope of services provided. All fees should be fully disclosed in writing.
#3. Always make sure you know where your money is deposited. Typically this would be at a custodian or brokerage that is responsible for safeguarding your money. These are names like Charles Schwab, TD Ameritrade, Fidelity or Vanguard. Never make a check out to your advisor or your advisor's firm unless you are paying them directly for advice on a retainer or hourly basis. Your investment checks should be made out to the place they are being invested or deposited with. Don’t abbreviate names on your checks and follow the money. Check and double check the deposit through a third party source. Call Ameritrade direct or log into your account over the internet to confirm the money has arrived and has been properly allocated.
#4. Many times an advisor will create personalized statements when they are misusing client’s assets. This allows advisors to hide transactions; you must receive your statements directly from the place your money is being held. Once again this would be from places like Schwab, Ameritrade or Fidelity. If you receive customized statements from your advisor they must be accompanied by custodian statements.
#5 Typically someone that will separate you from your money illegally will use their likeability and their personality to make you trust them. You must not be afraid to ask the tough questions and do not accept their answers without checking. The more you like your advisor the easier it is to take advantage of you. When things don’t feel right; many times they are not.