Seeking financial advice has been a growing trend in the US since the onset of the pandemic, which caused a recession, volatility in the stock market, and rising living costs. These factors compelled many to sort out their finances by connecting with financial advisors. However, finding the right advisor can be challenging, even if you want to create a financial plan and not stick with the advisor for the long term.
In a Reddit post, a user shares that she earns $100,000 annually from an irrevocable trust with $2 million locked in till 2030. At the same time, she has $200,000 in a Schwab fund. When she started looking for a financial advisor to help with taxes and investing, her stylist recommended a highly qualified one.
She trusted the stylist and paid $1,000 for a financial plan, only to be ghosted later. "My advisor is one of two women who own their own company. They have an admin, but I've only dealt with one advisor," the Redditor said in a post. Trusting an advisor recommended by a family member or a colleague is very common, and clients typically either lose money or pay very high fees.
She has yet to contact the advisor despite repeated attempts over a year. The advisor, a licensed, certified financial planner (CFP) and a Certified Divorce Financial Analyst (CDFA) doesn't have access to her funds or accounts, but the $1,000 in fees is a great deal for the Redditor.
"I've left her a voicemail and emailed her requesting a refund. It's my fault for not being diligent, but I trusted her, and she should've communicated with me if she didn't want me as a client or was busy," she said.
Financial advisors ghosting, not keeping your interests first, and charging you high fees are concerns that have lingered for decades. When looking for an advisor, verifying their credentials, work history, fee structure, and if they align with your financial goals is imperative.
According to CFP Steve Zakelj, calls to your financial advisor shouldn't go unanswered for over two days. While many suggested she dispute the Amex card transaction and claim chargeback immediately, one may take several other approaches in similar situations.
Lodging A Complaint Against a Financial Advisor
Raising a complaint with the CFP Board can be a good starting point if the chargeback process doesn't work. Advisory certifications from the CFP Board set the industry standard. If the complaint is legitimate, the board can take disciplinary action against advisors, which will stay in their files for a long time. If an advisor ghosts you, a notice from the CFP Board can get their attention. However, the board cannot refund any lost money as it is not a regulator.
Simultaneously, one can escalate the situation by lodging a separate complaint with the US Financial Industry Regulatory Authority (FINRA). This non-governmental regulator protects American investors by ensuring fair and transparent practices in the securities industry. FINRA suggested you retain copies of all attempts to contact the advisory firm to support claims.
Finally, you can file an online complaint with the US Securities and Exchange Commission (SEC). They can impose monetary penalties, issue cease and desist orders, and suspend investment advisor registrations. Failing to comply with court orders can lead to additional fines and even imprisonment for advisors and their firms.
"Financial services is a heavily regulated industry. The brokerage part is self-regulated by FINRA, and the broker's responsibility is to only recommend appropriate investments, both in terms of financial risk, but also in terms of the sophistication and net worth of the investor," said Jim Hemphill, CFP at TGS Financial, adding that "if the adviser is a CFP or works for a registered investment adviser, he falls under the even more stringent fiduciary standard."
How To Check Advisor Records Like Disciplinary Cases?
The SEC's Action Lookup feature lets you check if there's any court action or judgment against your advisor when you enter their full name. Further, the Investment Adviser Public Disclosure website lets you check individual advisors or firms' credentials, conduct records, and employment history.
FINRA's BrokerCheck and CFP Board's advisor lookup tools can also help verify if your advisor is registered and has any previous regulatory actions. Meanwhile, your state securities regulator will help find information like investment-related licensing data.
Remember to ensure your advisor follows fiduciary standards that legally mandate them to work in your best interests. At the same time, determine why you need a financial advisor, such as taxes, estate planning, retirement planning, budgeting, or even divorce settlements. Although certified financial advisors can manage your overall finances, they might not be able to help with taxes as well as a registered public accountant.
The Financial Planning Association and the National Association of Personal Financial Advisors are good places to start looking for financial advisors. These online databases allow you to shortlist advisors or advisory firms based on their services, fee structure, and credentials.
