Personal Finance Essentials
Nine Taboos Between You and Your Advisor
Trust Your Advisor But
Never Break These Nine Rules
The following are things you should never do with a financial advisor, regardless of how much you trust them.
1
Never Write a Check Payable to Your Advisor for Investments
When investing money, your checks should be made payable only to mutual funds, ETFs, brokerage firms or insurance companies. No legitimate advisor would ever direct you to write a check for investments payable to them personally or to their firm. If your advisor asks you to do this, stop.
2
Never Allow Your Advisor to Be Listed as a Joint Owner, Beneficiary or Trustee
Your money belongs to you. The only place your advisor’s name should appear on any account document is as advisor of record. Granting an advisor ownership rights or beneficiary status over your accounts removes your control over your own assets.
3
Never Lend Money to Your Advisor
There is no professional scenario in which this is appropriate. A request to borrow money from a client is a serious breach of professional conduct.
4
Never Let Your Advisor Sign Your Name to Any Document
Many transactions require your signature, particularly those involving the disbursement of funds from your account. Even in urgent situations, forgery is a felony. There is no exception.
5
Never Sign a Blank Form or Contract
Signing a blank document is a violation of regulatory rules. Cross out sections that don’t apply and never leave blanks before signing anything. Note that advisors may sometimes omit account numbers or other identifying information from forms for privacy purposes – this is standard practice and acceptable. But the form itself should never be entirely blank.
6
Never Let Your Advisor Redirect Your Account Statements
You should receive monthly or quarterly statements directly from the mutual fund, brokerage firm or insurance company. If your advisor arranges for statements to go to their office instead of yours, that is a serious warning sign. Keeping statements away from you is one of the first steps in concealing fraud.
7
Never Let Your Advisor Receive a Share of Your Profits
Your profits belong to you. No legitimate advisor would propose this arrangement, and no regulation would enforce it in your favor. It’s your money – you earned the returns, and you keep them.
8
Never Let Your Advisor Assign Your Agreement to Another Advisor Without Your Consent
If your advisor retires or sells their practice, you are immediately and automatically relieved of any contractual obligations you had with them. Never let an advisor or their successor suggest that you are obligated to continue with the new arrangement. Assignment without your consent is an SEC violation.
9
Never Invest in Something You Don’t Understand
If a strategy or investment can’t be explained to you clearly, don’t invest in it. Complexity is not sophistication. Confusion is not a reason to proceed – it’s a reason to stop and ask more questions or walk away entirely.