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Little Red Flags to Watch Out For
If the recent economic depression left your finances in shambles, this means that you probably have more debts than assets. Your financial condition could be in such terrible shape that a financing consultant may have volunteered his services to help you straighten it out.
A common recommendation coming from these solicitous advisors is a refinance loan package along with a no-cost refinance offer. A lot of people were lured into this deal, since they were poorly advised by a bad financial planner. Understand that there is no such thing as "no cost refinance" --- whatever fees and charges you were required to pay in order to get your loan refinanced were merely added to your new loan balance. You actually ended-up with higher monthly amortization, which only looked lower if compared to the payments due on your past due loans. However, the latter had ballooned due to the penalty and past due interest charges of your account.
You could have paid for those refinancing charges by arranging with the bank to deduct the same from the cash proceeds of your new loan. That way, you could have avoided paying additional interest charges on your refinanced loan as a means to lessen the burden of monthly loan amortization.
Raise your awareness that professionally ranked and top-caliber consultants are those who prefer to employ their expertise in the field of financial analysis and their offers are for better investment deals. As professional advisors, they stand to gain in terms of legitimate commissions by helping clients gain substantially from their investment portfolios.
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Other Warning Signs to Take Note Of:
- Stay away from those who brag about their ability to work out deals in your favor. In most cases, these self-acclaimed advisors are connected with a bank or insurance company and their schemes often involve a conflict of interest between their regular job with a financial institution and their purported roles as consultants. Their interests stem mainly from gaining commissions as loan brokers or agents. Hence, they influence their clients to accept loan offers coming from banks or insurance companies.
- Avoid those who do not have enough knowledge about tax incentives, especially if you’re working for a company that entitles you to stock-option ownership. Different stock options have different tax implications and some employees have filed complaints against financial-plan advocates who did not provide accurate tax calculations. The shortcomings resulted to tax deficiencies due to disparities of payment advice. .
- Be wary of those who try to convince you that they are privy to "insider information." These consultants, however, have the blessings of the investment company in order to lure the less-savvy investors to put their money in not so lucrative, but safe, deals. Moreover, be in the know that insider trading of stock investments is basically prohibited. To the so-called financial planning experts, it is worth the risk they are taking since they earn commissions from both the investment company and the client.
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Tips on How to Avoid Bad Financial Advice
- If you need professional assistance in threshing out your mortgage loan problems, the fees for this particular services are not calculated on commission basis. A loan is a burden on your part, hence, it would be unreasonable to pay fees that are based on the amount of the loan for which assistance was provided.
- If in doubt about the planner’s proposal, scout for banks who have the same credit facilities and terms but are willing to negotiate for lower rates or longer periods. There are banks that consider a borrower's paying habits and paying capacity as well as offer workable solutions for distressed finances. A good financial advisor has a likely chance of finding one, if this is how he provides expert financing advice to his other clients.
- Hire a professional who is committed to helping you out in all aspects of your finances and not only for your investment ventures. If you suffer from heavy losses through natural courses or by your own decisions, it is important that your planner does not leave you in the lurch, so to speak. Consultancy services include looking for channels that can help you rebuild your investment funds. Abandoning clients in favor of those who have more resources is the worst trait of a bad financial consultant.
- Most financial planners have uplifted their status by taking in as clients, only those who meet a required minimum of $100,000 in terms of asset resources. Do not despair if you do not meet these requirements. In case you are badly in need of a consultant, research the Internet for organizations and not individual planners.
The best way to look for a financial expert is to ask for referrals through friends, family members or associates on who has served them well in the past, or even up to the present.