How to Identify Red Flags in Financial Advisor Behavior: 7 Warning Signs to Watch Out For

fake, money, fraud

Choosing the right financial advisor is crucial. A bad choice can lead to trouble. This article will show you how to spot warning signs in advisors’ behavior.

A majority of advisors provide value to their clients. However, some bad financial advisors take advantage of clients. An investor can sue or file arbitration claims to recover losses in those cases. Call our lawyers for a free, confidential consultation if you suspect this is your situation.

Keep reading for key insights.

Key Takeaways

  • Check if your financial advisor is registered with regulatory bodies. Unregistered advisors may not act in your best interest.
  • Be cautious if your advisor can’t clearly explain their fees. Hidden costs can affect your investment returns.
  • Warning signs include taking anyone as a client and not answering calls or emails, showing they might not value personalized advice or communication.
  • A clean regulatory history is important. Advisors with past penalties could be risky to work with.
  • Know how to report elder financial abuse and take steps if you suspect malpractice by your financial advisor, like gathering evidence and contacting the compliance department.

Identifying Red Flags in Financial Advisor Behavior

Spotting the warning signs of bad financial advisor behavior is crucial. Knowing these red flags helps protect your investments and future.

They’re not a registered professional

Checking if your financial advisor is a registered professional is crucial. A registered investment advisor must follow strict regulations that protect you, the investor. If they’re not registered with regulatory bodies like the Securities and Exchange Commission (SEC) or Financial Industry Regulatory Authority (FINRA), this should raise a major red flag.

Registration ensures they meet certain standards of ethics and professionalism.

Not being registered means they’re not legally obligated to act in your best interest, known as the fiduciary standard. Advisors who avoid registration may have conflicts of interest or might not have the qualifications to provide sound investment advice.

Always verify an advisor’s registration status to ensure they can be trusted with your investments and retirement planning.

They can’t explain their fees clearly

Financial advisors should always be clear about how they make money. If your advisor can’t explain their fees in simple terms, that’s a red flag. Some advisors earn through commissions, others charge a flat fee or a percentage of assets under management (AUM).

Not being upfront about these costs could mean they’re hiding something. This lack of transparency makes it hard to trust them with your investment decisions.

Every financial plan should align with your goals without hidden fees eating into your profits. If clarity is missing in fee structure, it questions the integrity and suitability standard of the advisor’s service.

Moving on, another concern arises if they’ll take anyone as a client without proper assessment.

They’ll take anyone as a client

Good financial advisors often have a specific target clientele based on factors like income, investment size, or financial goals. If an advisor seems eager to take anyone as a client without assessing their financial situation or goals, it raises concerns.

This behavior might indicate they’re more interested in earning commissions than providing personalized investment advice that suits each client’s unique needs.

Advisors should prioritize your best interests and work in a fiduciary capacity. Those willing to accept any client may not be dedicating the time and effort needed to tailor their strategies effectively.

They might overlook crucial aspects of money management, leading to generic advice that fails to address personal objectives or risks.

They don’t answer their phone or respond to emails

Ignoring calls and emails is a big warning sign. A reliable financial advisor always makes time to talk or write back. If they dodge your attempts to communicate, trust might be at risk.

This behavior shows they don’t value you or your financial well-being.

Next, we’ll discuss why not having a clean regulatory history is troubling for an investment adviser.

They don’t have a clean regulatory history

A financial advisor without a clean regulatory history is a big red flag. This means they’ve had issues with authorities like the SEC or FINRA. Maybe they broke rules or deceived clients in the past.

You can check their record on the Certified Financial Planner Board of Standards, Inc. website.

If an advisor has been penalized before, it could happen again. It’s not worth risking your money with someone who has not followed the law or ethical standards. Next, watch out for advisors who pressure you into making decisions without giving you time to think.

How to Recognize, Prevent, and Report Elder Financial Abuse and Exploitation

Elder financial abuse occurs when someone illegally or improperly uses a senior’s money or belongings. Look out for sudden changes in bank accounts, unexplained withdrawals, and unpaid bills.

Odd behavior from the elderly person about their finances is also a warning sign. To prevent this, watch over financial statements and advise seniors to never share personal information.

Teach them about common scams and ensure they check with a trusted person before making big decisions.

To report elder financial abuse, contact local adult protective services or law enforcement. There are also state securities regulators and the National Center for Elder Abuse that can help.

Making sure seniors have secure finances involves vigilance and immediate action when something seems wrong.

Next up: Steps to Take if You Suspect Malpractice by Your Financial Advisor

Steps to Take if You Suspect Malpractice by Your Financial Advisor

Just as recognizing and reporting elder financial abuse is vital, so is taking action if you suspect malpractice by your financial advisor. First, gather all related documents such as statements, emails, and notes from conversations.

This evidence will support your case. Next, contact the firm’s compliance department to report your concerns officially. They must investigate your claims according to industry regulations.

If not satisfied with their response, escalate the issue by filing a complaint with regulatory bodies like the SEC or FINRA for registered investment advisors and brokers. You might also consult a legal professional specializing in securities law to explore further steps.

These actions help protect both your investments and integrity within the financial advisory sector.


Watch out for these seven red flags in a financial advisor’s behavior. They show when an advisor might not have your best interests at heart. Spotting these signs early can save you from stress and financial loss.

Always ask questions and do your research before choosing someone to guide your finances. Keeping these tips in mind will help you make better decisions about who you trust with your money.


1. What are red flags in a financial advisor’s behavior?

Red flags include unethical behavior, promising to always beat the market, conflicts of interest, and not being transparent about fees.

2. Why is it bad if a financial advisor tries to beat the market all the time?

Trying to constantly beat the market can lead to risky investing and might show they’re not focusing on long-term growth for your investments.

3. How can I tell if my financial advisor is not being honest about their fees?

If your financial advisor avoids talking about how they get paid or doesn’t clearly explain fee-only versus other types of fees, that’s a warning sign.

4. What does conflict of interest mean when talking about financial advisors?

A conflict of interest happens when a financial advisor could benefit from decisions made with your money, putting their gain above what’s best for you.

5. Can asking for Form ADV help me learn more about my financial advisor’s background?

Yes! Asking for Form ADV will give you information on the adviser’s business, including any disciplinary actions or conflicts of interest.

6. What should I do if I suspect fraudulent activities from my financial advisor?

If you think there’s fraud happening, report it immediately to authorities and consider getting help from forensic accountants who specialize in investigating these issues.

Scroll to Top