Keep Your Eyes Open For These 4 Signs Of Financial Adviser Fraud

One cannot emphasize enough on the importance of carefully selecting a financial adviser to manage your funds. Amidst a multitude of reputable advisers who perform their role efficiently, there exist a large number of financial planners who prioritize their personal gain over their clients’ money.

Fiduciary frauds or financial adviser frauds are illegal practices committed by financial institutions and professionals that breach the trust of their clients to make them invest in unreliable investment schemes. As opposed to their legal obligation to act in their clients’ best interests, scammers prefer to satiate their own self-interest.

In the United States, the Securities and Exchange Commission (SEC) regulates all investment advisers and the operations within the financial markets. One of the central elements under the Investment Advisers Act is the requirement that an individual or firm working as an investment adviser needs to register with the SEC, unless exempted or prohibited from registration.

Keep Your Eyes Open For These 4 Signs Of Financial Adviser Fraud

You need to immediately take legal actions against your financial adviser if you come across any of the following red flags:

1. Ambiguity about License to Practice

Posing as a financial adviser isn’t a challenge. Anyone can become a certified financial planner. Financial advisers may actually claim to have professional qualifications, when in reality these may be fabricated ones. To add to this pretense, one does not require prior experience to advise a potential investor.

So, before you authorize an adviser to manage your investment portfolio, you should always check if he/she is a licensed broker or financial adviser. Advisers must take professional examinations and fulfil certain requirements from their professional organizations to act as certified financial planners (CFP) or chartered financial consultants. Ask for documents that demonstrate his/her competency in helping investors create a comprehensive financial plan.

2. Compelling to Opt for Immediate Purchase/Sale

Remember, you need not give in to pushy sales tactics, especially when they are related to investment recommendations. If your adviser wants you to take hasty decisions on an investment opportunity, or vouches for high-risk securities, then you need to raise your guard. Invest your money only when you are convinced of the offerings.

An ethical financial adviser will always construct an investment strategy that is in accordance with your monetary goals and risk tolerance, and not his/her targets. Warn your adviser if you find him/her trying to quicken an investment decision. Any legitimate investment worth venturing is likely to remain in the market for a day or more. Finalize your move only after you’ve had the time to research it independently.

3. Requests of “Transfer the Money to Me”

Beware of fraudsters who claim to be financial advisers and ask you to write checks to them. As an investor, you need to write checks to an investment bank or a mutual fund company that you are interested in.

When such a situation arises, independently conduct a background check on your adviser, and check if he/she is actually employed by a financial institution. Several search tools, devised by the Financial Industry Regulatory Authority (FINRA), have made it easy for investors to research the professional backgrounds of registered brokers, and investment advisers.

Take help from an experienced financial adviser fraud lawyer to legally deal with such a scammer. Legal intervention can save you from losing all your money.

4. Encouraging Freebies

Nothing is free in the financial world. When a financial adviser promises that his services won’t cost you a thing, then you may want to avoid such a business deal. Verify the credibility of such advisers by asking how do they manage to receive their revenues.

It is only the ‘fee-only financial advisers’ who are paid exclusively by their clients, and the rest of the members of the advisers fraternity collect their commission from insurance companies and mutual fund firms each time they sell their financial products. Remember, financial advisers are mere marketers of these products and need not always think in your best interest. You, therefore, need to determine the relevance of the bonds, shares and stocks you invest in. Only legitimate advisers will make the effort to explain how they get reimbursed.

Ask for the source of information about the stock values from your adviser. Make sure that the data is gathered from legitimate sources and is readily available to the general public.


Chartered financial analysts or financial advisers are trained professionals whose expertise lies in providing investment advice to potential and existing investors. Not many investors are aware of the pros and cons of every investment scheme. Hire an adviser only if you are willing to trust him/her with your savings. You need to be a vigilant investor to make informed investment decisions and avoid getting trapped in financial frauds.

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