Choosing a Wealth Manager: Watch Out for These Red Flags

Choosing a wealth manager can seem like a daunting task. There are over 15,000 financial advisors in the State of Texas alone. Unfortunately, not all of them offer the best advice for clients. It may not be easy to determine what makes a good financial advisor. Here are some red flags that signal an advisor is not acting in your best interest.

Red Flags


Advisors who work on commission only, may have a conflict of interest. They may not be offering clients the best financial advice for their situation. A commission only advisor may be in a scenario of selling as much of their sponsor’s products as they can. If you’re choosing a wealth manager based on what seems to be a low price product or a very low fee strategy you may be at risk of a high commission product. Often these fees are not accessed to you directly but are built into the product.

Confuses insurance with investment

Some financial advisors will promote insurance as an investment, but they are two different concepts. Insurance has been designed for protection and not for growth. If you want to see your money grow, you’ll need to be prepared to see some downturns over the years. However, the risk of downturns shouldn’t push you – or your advisor – into the annuities market. The downside of this approach is that annuities often have high costs and a cap on earnings. While annuities can be a fit for some it is not a one size fits all type of investment product. Make sure you know the cons of an annuity, which are not often explained or communicated clearly.

Links to broker, bank or insurer

Like commission advisors, if you’re dealing with a wealth manager with links to a bank, insurer, or broker, they’ll be incentivized to promote these organizations’ products. Moreover, the list of investments that you have access to may be limited. Working with an independent advisor means you’ll be able to put together an investment portfolio that suits your needs.

Questionable awards

When choosing a wealth manager, you’ll likely see a list of awards and accolades they’ve received. However, if you look closely, these honors may not be as impressive as they first seem. Consider how the awards are determined. If they are awarded with a peer vote, then you can trust that they are honors worth receiving.

Lack of fiduciary standard

Financial advisors who use vague language about caring for your best interests are not enough. Choose a wealth manager that can give you a clear and straightforward answer about their fee structure and how they are compensated.

Choosing a Wealth Manager

Trusting someone with your finances can feel scary, but it doesn’t have to be. When choosing a wealth manager, here are some questions you should ask that will help you determine whether they are an advisor you want to work with or not.

  1. Are you a fiduciary? – Advisors that are fiduciaries have a financial and ethical duty to act in your best interest. When it comes to your money, knowing you are working with a fiduciary can give you peace of mind that your investments are sound.
  2. Do you have a financial service specialty, or do you cover every area? – The investment industry is broad, and one person cannot possibly have the knowledge needed to master it all. You really want to work with an advisor who specializes because you can rely on their
    expertise. Wealth managers that try to be an expert in everything often spread themselves too thin. They may not have all the information to help you make the right choice. Choose a wealth manager that is part of a team. In that scenario, the team can help you handle your wealth.
  3. Do they sell commission products? Can they provide you with a list? Your advisor should be recommending investments that are in your best interest, not just the ones that earn them the highest commission. By knowing what commission products they sell, you’ll
    be more prepared to know if these products are something you really need.
  4. Are they able to explain their fees in a few sentences, or do you hear them say, “a lot of it depends…”? Choose a wealth manager who gives you a straightforward answer. You don’t want to be surprised when it comes time to pay their fees. When your advisor is honest with you upfront, it helps establish trust.
  5. Can they explain their financial planning process in detail, or do they say, “We listen and set goals”? You should choose a wealth manager that has a clear approach for determining your best investment options, particular for retirement income. Advisors who cannot explain their process have not given it enough thought, and you shouldn’t trust them with your money.

With thousands of financial advisors to choose from, you must watch out for red flags. If you’re concerned that your wealth manager is not acting in your best interest, you don’t need to continue working with them. Instead, contact Iron Oak. As fiduciaries, we are bound to help you make the right investment choices.

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