How to Monitor Your Financial Advisor

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How to Monitor Your Financial AdvisorIn 2004 newspapers and television reports across New England were full of accounts of the alleged activities of financial advisor Bradford C. Bleidt . Mr. Bleidt was alleged to have defrauded his clients of more than $100 million over 20 years, and to have concealed his actions by taking money from new clients to cover his thefts from old clients.

Fraud by financial advisors is exceedingly rare. Nonetheless, the tragic losses by Mr. Bleidt’s clients and clients of other fraudulent advisors undoubtedly make other people wonder if their financial advisor is acting in their best interests. The National Association of Personal Financial Advisors (NAPFA) offers the following advice about how to protect yourself as you work with a financial advisor.

Know where your money is

Whether your advisor is managing your money or you are the person who signs-off on each financial decision, an independent financial institution will hold your money. This company has “custody” of your money. Make sure you know which company it is, how to contact the company, and what your account numbers are.

When seeking a financial advisor, you should find out if they are willing to sign a fiduciary oath putting your interests above those of their employer.

Read your financial statements

The firm that has custody, typically a broker/dealer, bank or trust company (known as the “custodian firm”) is required to provide you with financial statements at least quarterly. Read them. Most importantly, make sure that these statements are coming to you directly from your custodian firm – not from your advisor. In the case of Mr. Bleidt, the government alleges that he had the custodian firm’s financial statements sent to him instead of his clients, and then he created fictitious financial statements that he sent to his clients.

Stay in contact with your advisor

Visit with your advisor at least annually, and stay in contact by e-mail or telephone. If your advisor is vague or evasive, ask for more information. Holding these regular meetings has the added benefit of making sure that you and your advisor are clear about your financial goals, risk tolerance, and investment strategy. In fact, poor communication between client and advisor is a more common source of dissatisfaction than any type of illegal activity.

Having a financial advisor, even a person with great credentials, is no substitute for devoting some attention to your personal finances. It’s your money, so you need to remain involved.

Consumers need to be aware of situations in which their advisor is not proactively placing the good of the client above all else. Many of those in the financial profession do not put their client’s interests first. They do not accept fiduciary responsibility to act in their client’s best interests. This often has a significant negative impact on a client’s finances. This isn’t illegal – but it’s a practice NAPFA finds troublesome. That’s why every year each NAPFA member signs a fiduciary oath, committing to act in good faith and in the best interest of the client.

Many financial advisors, such as those who work for large financial services companies, have a fiduciary obligation to their employer, not to their respective clients. NAPFA members are different. They have no employer quotas to fulfill and do not accept commissions or any type of third-party compensation for providing financial advice.

When seeking a financial advisor, you should find out if they are willing to sign a fiduciary oath putting your interests above those of their employer. NAPFA members all agree to the following fiduciary oath:

NAPFA Fiduciary Oath

  • I shall act in good faith and in my client’s best interest at all times.
  • I shall provide written disclosure to my client of any conflicts of interest that may compromise my impartiality or independence.
  • I shall not accept any referral fees or compensation that is contingent upon the purchase or sale of a financial product.

For more information about the nation’s leading organization of Fee-Only comprehensive financial advisors visit

Photo used under Flickr Creative Commons license. The original version of this article was published December 20, 2004.

Follow David John Marotta:

President, CFP®, AIF®, AAMS®

David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.