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Wealth Manager Red Flags


If busy physicians are going to leave their wealth in someone else's hands, then there are a few questions they should ask when selecting an advisor - as well as ‘red flags' to avoid at all costs.

Your money is important to you, your family, your savings goals and your retirement. So if busy physicians are going to leave their wealth in someone else’s hands, here are a few questions to ask when selecting an advisor — as well as ‘red flags’ to avoid at all costs.

How does the advisor get paid?

Is she/he commission based or fee-only? A fee-only advisor does not accept any type of commissions based on product sales. This allows the advisor to provide compensation conflict-free advice and generally provide more comprehensive advice.

Does the advisor have independent custodians?

When an advisor takes custody (holding assets in his/her name) of a client’s funds or securities, the risk to the client increases dramatically. An independent custodian plays an integral role in helping guard against fraud and misappropriation by advisors.

• Do your research

Is the firm registered with the SEC or the state? Use the SEC website to make sure the advisor does not have any SEC filings or conduct issues against him/her. BrokerCheck is a free tool to help people research the backgrounds of current and former FINRA registered firms and advisors.

What certifications does the advisor have? Check your advisor’s credentials. For example, the Certified Financial Planner designation is run by the CFP Board; you can verify if he/she has the CFP by going to the CFP Board website. Check to see if the advisor is part of the Financial Planning Association and/or National Association of Personal Financial Advisors.


If you seek a referral from a contact of yours, check if that contact is someone personally working directly with the advisor and can share with you details about his/her experience. Ask the advisor for a reference (a current client) who can share his/her experiences with you.

Who is the advisor’s typical client?

Does the advisor have any sort of expertise that is relevant to your situation? Are their clients in a similar situation to yours?

How does the advisor work?

Does a client work directly with one advisor or is there team coverage? What is the advisor’s investment philosophy and investment process? Does the advisor provide investment management and financial planning services?

Fees and assets

How much does the firm manage in assets? Is it large enough to be stable but small enough to provide you with personalized client service? Ask about fees that the underlying investment products incur and how the advisor manages cost effectiveness.

• Trust and communication

Are you comfortable asking the advisor difficult financial questions and are you willing to take his/her advice?

Stay away if these red flags appear!

If the advisor does not have any certification. If you want someone with comprehensive financial planning training, for instance, look for the CFP or ChFC designations.

If the fees/commissions are opaque or the advisor claims their services are free!

When you ask the advisor if he/she acts as fiduciaries and the answer is “no.”

If the advisor promises to outperform the market or claims there are “secrets” to accumulating wealth. Or the advisor tells you that you can get high returns with low risk. Anything that sounds too good to be true is likely to be untrue.

If the advisor is pressuring you to commit to him/her, buy a product or sign a contract under a time deadline.

If the advisor promises you a specific return! (Unless it is a pure fixed annuity/CD.)

If you are asked to recruit other investors (i.e., Ponzi scheme).

If the advisor fails to explain to you a specific concept in a clear manner.

If the advisor fails to discuss your financial goals and instead makes sweeping promises on what he/she can do for you.

If you are considering an advisor that works for a large company, keep an eye out if they always recommend their own firm’s funds. Ask them for a sample portfolio.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice