Take steps to ensure your financial adviser is trustworthy
Thu Feb 5, 2009 | | Posted in Finances Advisers
In order to avoid a Ponzi scheme, you must take control of your money. At least, know what your financial adviser is doing with your hard-earned money.
Perform a few very basic checks that can go a long way. It will give you the confidence that you need to have in your financial adviser.
Remember it’s your hard-earned money. You need to be careful and mindful about it. When you give it to strangers for investment, you must have trust in them. They must have proven record of being trustworthy.
Check out Adviser
- Know where your money goes when you hand it over to your financial adviser.
- If your adviser is producing his or her own statements, as Bernard Madoff apparently was, watch out.
- Be particularly careful if your adviser has switched accounting firms recently and find out why.
- When an adviser leaves an accounting firm, it might be because the accountants did not feel comfortable with the adviser’s financial handling.
- Gather information on the advisers. Find out whether they have ever run into trouble.
Check out Custodian
- Whoever manages your portfolio should use an independent financial institution, known as a custodian, to hold your assets.
- Get the name of the custodian firm and its contact information.
- Instead of relying on your adviser’s word, check out the custodian yourself.
- The presence of a custodian ensures that money from new investors cannot be used to pay off old investors, like Madoff was doing.
Check out Auditor
- Once you have checked out the custodian to your satisfaction, find out which auditor your adviser uses.
- Check the auditor, particularly if the auditor works at a firm you have never heard of.
- Make sure the auditor is licensed to work in your state. Each state has its own database you can check.
- Having independent auditors is crucial because they verify the existence of the assets in your account and others your adviser manages.
In a Nutshell
Do think about the fact that your financial situation can change really quickly. It has changed for the worse the last couple of years for many people.
You might also like...
- Find a good Financial Adviser
- 7 Tips to choose a professional tax adviser or attorney
- Avoid Crooks Even If You Know fundamentals Of Investing
- What’s the difference between a doctor and a financial adviser?
- Will you hire a good financial adviser? I know I didn’t.
Information contained herein is general in nature, and is provided for informational and educational purposes only. Past performance is no guarantee of future results. Talk to your financial adviser.
Read more articles in Finances Advisers
