Is your age of retirement approaching in a few decades? Well, then have you started looking for reliable investment strategies to secure your finances? Or are you getting started in your professional life and want to focus on financial security for the future? Perhaps, your new business is finally taking off, and you’re now ready to expand your financial portfolio?
Have you nodded your head in agreement to any of the above questions? Then it’s high time you consider recruiting an investment broker. It’s essential irrespective of whether you have sound knowledge of stocks and securities.
A good investment broker’s services aren’t limited to handholding you through the process of buying and selling stocks. They’ll offer advice on the right approach to investment planning. Also, they’ll do most of the groundwork on your behalf, thus helping you make the right decisions regarding your investments.
Investment Broker Red Flags
In the age of Ponzi schemes, embezzlements, and other financial frauds, finding a trustworthy investment broker is a herculean task. That’s why in this blog we’ve outlined seven signs that’ll help you identify a bad investment broker. Let’s take a look.
1. They Hesitate When Asked for References
Unless you’re working with an established and renowned investment broker, it’s natural to question their credibility. In today’s day and age, just about anyone can claim to be a broker after trying their hands at stock trading.
That’s why it becomes imperative to understand the experience of their previous and existing clients. If a broker is worth their salt, they’ll provide you with a handful of references right away. On the other hand, if your broker refuses to connect you with any clients, it could be a major red flag.
It indicates that they’re new in the industry or they’ve made some serious mistakes with previous clients. So, make sure you ask for a few references before hiring an investment broker. Also, it’s a good idea to check their objective reviews on a trusted platform like Investimonials.
Apart from getting a glimpse of their clients’ experiences, reviews platforms will help you understand whether the broker was involved in any scams. You’ll also get a better idea of their services and realize whether they’re the right fit for your needs.
2. They Run a One Man Army
When it comes to stocks and securities, your best bet is to choose a broker who works at or runs a full-fledged brokerage firm. If not, you’ll be left in the dark about your investments when your broker falls sick or meets with an accident. Find out whether they have a team you can connect with when your broker isn’t available.
3. They Pretend to Be a Know-It-All
The landscape of financial investments is diverse, complex, and volatile. It’d be wrong to expect that a broker would have a deep understanding of every aspect, including taxes, personal investing, estate planning, etc.
Most often, if a broker insists they can manage your entire investment portfolio on their own, chances are they’re making tall claims. A credible broker will acknowledge their limitations and refer you to their colleagues who offer certain specialized services.
4. They Never Call You
Some brokers never call their clients unless they want to pitch another new plan or scheme. The biggest warning sign of a bad investment broker is they’ll go off the grid when a trade goes wrong or the market indicates a downward spiral.
A reliable broker will make the effort to reach out to you and update you about your securities and portfolio. They’ll likely even arrange regular meetings with you to assess your changing financial goals. If you find yourself constantly following up with your broker to understand the next move, it’s time to replace them.
5. They Solely Earn Commissions
If a broker’s earnings are entirely based on commissions, they won’t always keep your best interests in mind. Instead, they might resort to churning, i.e. buying and selling securities without considering your needs and goals. Major red flags to watch out for include frequent or unauthorized trading from your account.
It’s wiser to recruit a fee-based investment broker who will get paid a fixed percentage of your assets. In such a scenario, they’ll work hard to grow your portfolio and help you achieve your investment goals.
6. They Don’t Show Any Interest in Your Personal Life
No. Your investment broker doesn’t need to know what you eat for every meal throughout the day. Nor do they need to understand your relationship and family dynamic. But unless they know about your aspirations and ambitions in life, they can’t identify your investment goals and risk tolerance.
A good broker will ask you the right questions to know you on a personal level without crossing the line of professionalism. On the other hand, a non-competent broker will only be concerned about executing trades on your behalf without any idea of the future you aspire to have.
7. They Adopt a Reactive Strategy
It’s one of the most striking red flags indicating an inexperienced or unprofessional investment broker. If they tend to change their strategy on the go instead of preempting and leveraging market trends and events, you should consider letting them go. A good broker is one who always comes armed with at least one backup plan.
Whether you’re investing for your dream business or a comfortable retired life, it’s essential to find a reputed, experienced, and reliable investment broker. Apart from keeping an eye out for the aforementioned red flags, make sure you check their credentials and qualifications.