Take Steps To Ensure Your Financial Adviser Is Trustworthy

Friday, July 20, 2012, AM | 10 Comments

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.

There are three entities involved in your account. You know your financial adviser because that’s who you deal with. But two others are involved as well: Custodian and auditor.

    Check out Adviser

    Your financial adviser must be trustworthy to your satisfaction.

  • 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

    Custodian is a person who has responsibility for or looks after financial assets.

  • 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

    The auditor audits your account for its existence and accuracy.

  • 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.

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  1. 10 Responses to “Take Steps To Ensure Your Financial Adviser Is Trustworthy”

  2. By Judit on Aug 12, 2012, 7:49 pm | Reply

    With so many books out there today about taking ctonrol of your finances, this book really delivers. Chris Hendrickson has managed to make the subject matters that are usually hard to digest very enjoyable to read. I found the book very manageable since there is a clear action plan for success to turn any situation around. I have read many of the books out there on personal finances, but many of the other books are heavy in theory and light in action items. This book is not only for people in debt, but also people who don’t ever want to be in debt! Our country would be in a much better place right now if The 5-Minute Debt Solution was taught in schools around the world.

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