Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Financial adviser red flags

By Gerri Willis, CNN personal finance editor


NEW YORK (CNN) -- Bernie Madoff. Allen Stanford. You don't have to go too far to find bad financial advisers. What are some red flags that investors should keep an eye out for?

There are usually some tell tale signs that your adviser may not have your best interests at heart.

home_rich_cover.03.jpg
For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.
CDs & Money Market
MMA 0.30%
$10K MMA 0.28%
6 month CD 0.39%
1 yr CD 0.63%
5 yr CD 1.48%

Find personalized rates:
 

Rates provided by Bankrate.com.

If your planner guarantees you big returns on investments, watch out. Investing is always risky and there is no way to guarantee a particular level of return.

And, as Madoff's victims found out way too late -- your checks should go to a third-party custodian who is actually holding your funds, not directly to the planner or his company.

Another sign: You're pressured to buy a specific investment -- remember this is your money, after all, you have to be comfortable with how its being put to work.

One word of caution -- firing an adviser just because you haven't made a double-digit returns over the past two years is wrong-headed. Some of the most level-headed and accomplished investors and portfolio managers had terrible performance over the last two years.

What you want to consider is just how adept they were at responding to the crisis -- where they still contending that GM stock was a great bet when the company was at the government's door asking for help? Or, did they duck your phone calls when the market was tumbling? Both are signs that you should get a new adviser.

If you are working with a stockbroker, call FINRA, the Financial Industry Regulatory Authority. That agency maintains the Central Registration Directory, a database of brokers that includes disciplinary actions taken against them and lawsuits.

Your state securities regulator may maintain information on your broker's employment history and education.

There are lots of designations for advisers -- the ones that mean the most are: CFP, Certified Financial Planner awarded by the CFP Board of Standards; and NAPFA, the National Association of Personal Financial advisers, a group of advisers who don't accept commissions for selling investment products, but work for fees paid by their customers.

-- CNN's Jen Haley contributed to this article.

Talkback: Are you happy with your investment adviser? To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.90%4.01%
15 yr fixed3.01%3.13%
5/1 ARM3.19%3.26%
30 yr refi3.98%4.12%
15 yr refi3.08%3.23%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,689.86 -56.12 -0.32%
Nasdaq 5,128.28 -0.50 -0.01%
S&P 500 2,103.84 -4.79 -0.23%
Treasuries 2.20 -0.06 -2.78%
Data as of 8:52am ET
Company Price Change % Change
Bank of America Corp... 17.88 -0.25 -1.38%
Micron Technology In... 18.51 -1.39 -6.98%
Facebook Inc 94.01 -1.20 -1.26%
Apple Inc 121.30 -1.07 -0.87%
Frontier Communicati... 4.72 0.09 1.94%
Data as of Jul 31

Sections

Some families are outraged at the sums they've been offered by Lufthansa as compensation for the Germanwings plane crash in March which killed 150 people. More

Fast-food chains that operate in more than 30 locations nationwide are the sole target of a new rule in New York to hike their minimum wage to $15. But consumers and small business owners, as well as some employees, may be the ones to pay the price. More

You can't blame it on the economy anymore. More Millennials now have jobs, but are still living at home. More