4. The hard sell pays off . . . for them
The hard sell and doomsday talk are signals that something is off. "The financial planning process takes time and is ongoing," Lemoine says. "If you're pressed to do something right now, that's a red flag," Copelin says. One example is when a planner is pushing a product or service before you have even talked about your goals, Lemoine notes. If you're told it's "now or never" to buy into a stock or bond offering, it's probably a sign to walk away.
5. Financial planning requires more than a degree
The practice encompasses a broad range of topics, from tax laws to life insurance. Ideally, a financial adviser has 10 years' experience in the business and has a little gray hair, Copelin says. "I have hired four or five new graduates from Texas Tech University. They come in thinking they can make $200,000. Six months into it, they always tell me, 'I thought I was ready to be a financial planner,''' says Copelin, who has been in the business for 26 years. "But there is a learning curve if you're doing comprehensive planning."
6. Heavy activity means they make money
Multiple transactions that incur fees and commissions should send off warning bells. "Some months (our client accounts) will have 20 to 25 transactions, but they don't create fees or commissions," Copelin notes.
7. They don't want to talk about their money
It's important to ask how a planner is compensated. Transparency is essential. "If they say, 'Let's talk about it later,' you may need to look somewhere else," Lemoine says. Hiring a fee-only adviser reduces the potential for conflicts of interest, Rogé points out.
8. Emotional events = profit
Unscrupulous financial advisers will take advantage of personal information and emotional events such as a divorce or the death of a spouse. Copelin recalls one widow who was contacted by someone through her husband's company after he died. She was told it was urgent that she roll over her husband's 401k and put it in an annuity, with 8% commission for the adviser. "It was as dishonest as could be," Copelin says.
It's better to find a financial adviser by word of mouth -- through family, friends or colleagues. If not, ask to call a few of the financial planner's current clients for a review. Work with an adviser who understands your profession or your life situation, such as whether you're a widow or a retiree, Lemoine says. Get names of advisers who specialize in these categories.
"Make sure your adviser lives like you do. If you're a teacher, work with someone who understands the stresses. You'll probably have more success," Lemoine says.
9. They want to cash in . . . on your cash
Most experts recommend having at least three months' living expenses saved up to carry you over a rough spot such as a job layoff. "You can't have enough cash in this environment," Copelin says. If an adviser wants to play around with your cash nest egg, it's probably another red flag.
