How to Spot Problems With Your Account?

Your relationship with your financial advisor is a two way street. It can only succeed if information is freely and frequently exchanged between both parties. This starts out with regular telephone communications. After your initial meeting most of your subsequent conversations with your financial advisor will be on the telephone. Bearing in mind that your advisor has numerous clients and cannot respond to each call every day, you should expect a return call within a reasonable time. And if your call pertains to a pending trade, you should receive a return call (or text or email) immediately.

A sign of trouble is the string of un-returned phone calls. Unreturned phone calls either means an advisor is not in the office, has too many clients, can not be bothered, or is simply too embarrassed or unwilling to address a problem in the account. As a client, it is your right to have a new advisor assigned to the account, or to have the account transferred to a new firm.

When looking at the monthly statements make sure you do not find any unauthorized trades, or unauthorized changes to your portfolio. Any unauthorized transactions should be brought to the attention of the branch manager immediately. Also, be mindful of an increase in trade recommendations made by your broker. For example, if you typically make one trade a month, and have been making three or four for the last two months at the bequest of your broker, take a step back and ask why the increased activity, and what are the costs of this increased activity. Not only is it more expensive, increased transaction activity could be a sign of excessive trading or churning.

Another area for concern is when your trade confirmations are marked incorrectly. At the time you open your account you should ask your advisor to explain the difference between “solicited and unsolicited” transactions, and how they are marked on the trade conformation. An unsolicited transaction is one you approached the advisor to make. It is typically noted by the marking of Unsolicited, or perhaps a Capital letter “U” on the confirmation. Incorrect tickets should be brought to the manager’s attention immediately.

Another problem area is when you notice the values on your account statement are declining and the advisor tells you that the monthly statements do not reflect the true value of the account. Although technically true because values fluctuate all day every day, you should have a means to value the positions in your account at any time. And, if fluctuating values concern you, you probably should not be invested in that particular security.

Lastly, if your advisor asks you to change strategy in the account or to invest in a private deal outside of the brokerage firm, be wary. Outside investments are generally prohibited, and do not come with the approval or research from your brokerage firm.