Many consumers are unable to determine whether their advisor is doing the right thing for them. There are a number of ways to objectively look at your financial plan and portfolio to realize whether you are working with a Salesman or a Fiduciary.

Here are a couple of examples that serve as RED FLAGS distinguishing between a Salesman and Fiduciary. When you notice one of the following items it would be in your best interest to begin the search for a new advisor.

First we can look at compensation. An advisor with a fiduciary responsibility will be open and up front regarding how they will be compensated while assisting you obtain your goals. This will either come in the form of a flat, hourly, or percentage of assets under management fee. If your advisor is not mentioning compensation without being provoked then most likely they are working solely off commission and wanting to place you in the product that benefits their wallet first and foremost.

The next piece of the puzzle includes looking at your investment portfolio. Many individuals own a portfolio of mutual funds and while this alone is not a RED FLAG we can determine if the advisor is doing the best thing for you or again just fattening their wallet and/or validating their broker contract. The quickest way to find a RED FLAG will be inputting the fund ticker symbol into Google Finance. For an example type in “OEGAX” and scroll down the page to “Key Statistics” in the right column you will see a Front Load of 5.75% and Expense Ratio of 1.62%. This means if you invest $10,000 into this fund you will be charge a fee of 5.75% or $575 dollars (now your initial investment is $9,425) with a reoccurring annual expense of 1.62% of your investment. If this investment goes up or down the advisor still gets paid and paid up front for selling you this fund! Does this formula give an advisor any incentive to make sure your investments are making money? NO! Now what breaks the camels back is if they “determine” down the road there is a better mutual fund for you they will make the trade and again receive commissions of any Loads. In my eyes an advisor should only get paid when they are making you money not moving money around. Now, if you are paying this advisor 1-2% of assets under management they will receive this fee along with any commissions generated (talk about a conflict of interest).

The final example (for this article) we will continue to look at your investment portfolio. If you are invested in mutual funds with no “Sales Loads” and paying your advisor a percentage of assets under management here is how to determine if they are acting in your best interest. There are many people out there that call themselves advisors but truly have no active knowledge of the financial markets; consider this to back up my statement. If you were an advisor with great knowledge of the financial markets while charging your clients a 1.5% fee and had a choice to either place them into mutual funds with extra expenses or buying individual stocks or ETFs to build a portfolio that puts you in control over expenses (and hopefully capture better results) which would you choose?

I truly hope the information above will give you better insight regarding your investments and advisor. There are many other ways to evaluate your investments and relationship, if you would like to discuss further please feel free to contact me directly at nhriczo@lanierfinancialgroup.com to set up a phone conference or video conference via Skype.