Buy Like Buffett: Do You Have a Bad Financial Planner?

Financial planning advice is one of those things that a lot of people find beneficial. They may have questions about their investing strategy and about whether or not they will have enough money to last them throughout their entire retirement. Financial planners can be a useful resource if you find the right one. They can help you create more wealth and structure a solid portfolio. Conversely, a bad financial planner can do a lot of damage to your financial goals.

Here are a few ways to tell if you have a bad financial planner.

Heavy Churning Of Your Account

Churning is the act of excessively buying and selling securities in your account. Unscrupulous brokers and advisors will actively trade your account in order to generate fees income for their own business. This practice is illegal but is still done by some brokers. Check your statements regularly. If you see a lot of needless buying and selling activity, you should consider looking for a new firm.

Guarantees Of High Return On Investment

If you have a financial advisor that guarantees high returns of 20% or more per annum, you should be concerned. The only risk-free guaranteed investments are ones that are offered by the federal government and they do not pay returns anywhere near that amount. Promises of high returns that seem out of the ordinary should make you skeptical of the services that your advisor is providing.

A Portfolio That Is More Suited For Your Child Than For You

A telltale sign of how good your financial advisor is can be seen in the construction of your portfolio. Do you have a portfolio that is designed to meet your needs or your financial advisor's wants? For example a portfolio comprised almost entirely of stocks would make absolutely no sense for an older individual just like a variable annuity would not make a whole lot of sense for a young working professional.

Company Products Are All That Is Recommended

Any advisor that recommends their company's products as the best solutions to meet your needs should not be trusted. Many financial advisors are biased towards their company's products because they get paid more money for recommending them. They may try and pressure you towards buying investments when there are better alternatives available. If you want to get around this conflict, you can seek advice from an advisor who is not compensated by any commissions.

Knowing exactly what to look for when selecting a financial professional can keep you from losing your hard-earned money.

Mark Riddix is the founder and president of New Horizons Financial Management, an independent investment advisory firm that provides personalized investing and asset management consulting. Mark is a regular contributor to Seeking Alpha and has written financial columns for Baltimore and Washington, D.C. area newspapers. Mark publishes his own financial blog, BuylikeBuffett.com and has written the book Your Financial Playbook.