The world of finance sometimes comes with a big elephant in the room – is your adviser trustworthy? Unfortunately, we sometimes see stories about financial advisers (or people in positions of power or influence in financial institutions) who have misappropriated funds for their benefit (i.e. they’ve stolen money from their clients).
We aren’t talking about lazy financial advisers or ones who simply don’t care about their job to do it well – we’re talking about the downright crooks. The ones who deliberately take advantage of you.
So what are the red flags of a crook adviser? In many cases where people have been robbed, the adviser has run their own in-house fund that they’ve encouraged clients to invest in. The trouble is that they can make up the paperwork and do whatever they want when it’s their own fund. In other cases, some advisers insist on having all the paperwork from clients’ superfund sent to them, and then report back to the client later. This of course allows for fund misappropriation. A good adviser will always be transparent with you, and if they are adamant that you don’t need to see the paperwork and say things like, ‘just trust me’ – this is a huge concern.
How you can avoid being robbed by your adviser: First, don’t discount gut instinct. When you meet with an adviser, read them as a person, not just by the paperwork and figures they’re presenting you with. If something doesn’t feel right, trust that instinct. It’s your life savings – it’s important. And we aren’t talking about the nerves you might feel about seeing an adviser for the first time – a bit like joining the gym, nobody wants to do it but we know it’s good for us – we’re talking about getting a bad feeling about an adviser. We like our clients to trust us, and we always tell them to make sure they feel comfortable with us on a personal level as well. We won’t be offended if people go elsewhere, simply because we don’t gel personally – that’s just life. But we consider ourselves highly trustworthy and we don’t rob our clients! You wouldn’t think we’d have to state that, but there you go!
Second, always make sure you have your super statements sent directly to you – not to your adviser. And beware if the adviser and the fund are one and the same. In fact, run the other way.
Finally, never worry about offending someone. You must look after yourself – this is your life, it’s important. Just because you’ve been with someone a long time and it’s awkward to leave doesn’t make it right to stay.
In saying all this, advisers who set out to do the wrong thing are not that common – despite the two incidents in Sydney recently, it is actually quite rare. As long as you know what to look out for, you’ll be fine!
Listen to the related podcast here!
Dallas Davison, Michael Hogue and Ali Hogue.