Coronavirus is affecting more than just Americans’ health. People with money in the stock market may also be seeing lower returns. This can cause some investors to panic.
During these tough times, many turn to their financial advisers to make sensible money moves. However, not even the most experienced ones know exactly what’s going on. While countless advisers hold a fiduciary duty to their clients, others may use this time to try and scam them with aggressive and risky investments. Unfortunately, this could cause some investors to lose more money while the adviser profits off fees and commissions.
The type of advisers investors have can play a role
There are two types of financial advisers: Fee-only advisers and fee-based advisers. Fee-only advisers are usually held to fiduciary standards, meaning they’re required to act only in ways that reflect their clients’ best interests. In a volatile market, fee-only advisers typically focus on what clients can control and look for ways to help them ease their worries. That can include helping clients reduce their taxes and lower their premiums to maximize insurance coverage.
On the other hand, fee-based advisers may not think about helping their clients, but instead sell them financial products that hurt rather than help them. Many fee-based advisers have conflicts of interest because not only do they provide only “suitable” or faulty products to clients, they also get paid to sell those products by those who profit off of them.
Should I leave my adviser to save what money I have left?
In some cases, Americans tell their financial advisers more than they tell their doctors. Because of this, it can make investors feel like they have a close relationship with them. However, many financial advisers show their true colors during tough economic times, and it isn’t always beneficial for investors or their life-savings. If investors don’t know where their financial adviser stands, they may want to ask them the following questions:
- Are you a fiduciary?
- How do you make money?
- What’s your plan to help me with my future financial goals?
- How will you help me with taxes?
- What other services do you offer that can help me?
If the adviser doesn’t give a clear-cut answer to any of these questions, it may be time to find someone new.
Remain wary during troubling times
Market volatility can make any investor nervous. However, they must keep their emotions in check, as some advisers may look to take advantage of them when they’re vulnerable. If advisers deceive or rip-off their clients, investors need attorneys on their side that can get them the justice they deserve.