How do you know if you can trust a financial advisor?

Many expats in the UAE receive phone calls from various companies offering financial advice. By email, advertisement, in the malls and various other ways Dubai Residents are asked to part with their money.

This is not only applicable to financial advisory firms. Most banks are having a wealth manager or a relationship manager who offers financial advice. Real estate companies are texting or calling clients for real estate investment in the UAE or worldwide. You don’t have to have an appetite for investing, investment options will come to you. Now the talk of the town is Bitcoin. It seems so easy. Everybody that invested made a lot of money, your colleagues and others keep talking about it. How do you know which source you can trust? What is “fake news” and what is the right advice?  

I have made a list of 10 questions which you can ask any financial advisor or investment advisor that is asking you to invest your hard earned money into something.

  1. How are you paid?

  2. How much commission will you earn once I invest in this? 

  3. How is this investment meeting my specific requirements for expected returns and risk level?

  4. How much time do you spend on servicing me once I become your client?

  5. What is the investment strategy behind this investment?

  6. What are your credentials?

  7. How long have you worked in this industry and how many testimonials do you have?

  8. Are you independent and not having a special incentive to sell this particular product?

  9. Have people shared positive or negative reviews about you and/or your company? 

  10. Ask yourself (the investor), do you understand in full what you are going to invest in? 

After you have asked the financial advisor or investment advisor the right questions, you need to decide if you feel comfortable enough to move forward with the proposal or not. It is important to also look at the body language of the advisor. How is he answering your questions? Is he looking away from your eyes, is he touching his nose very often? Is he stumbling in his words or is he speaking very fast? Here are some reliable scientific body language signs which can help you to determine if somebody is likely to lie or not. Maybe somebody is answering your questions correctly, but is he telling the truth? Can you trust that he is answering your questions ethically?

According to there are some reliable ways on how to get an indication if somebody is telling the truth. For example: a change in their intonation (voice), the person might be sitting very still, or if the body language is not matching what they are saying. The language used can change during the conversation. Covering their mouth and/or eyes, taking unnecessary long breaks, improvising with information and details.

It is very important to qualify the information which is given to you by an advisor. When you are asked to invest in a fund, you can ask for the ISIN  number. The International Securities Identification Number (ISIN) is a code that uniquely identifies a specific securities issue. Ask for a fact sheet. On a fact sheet you will find where the fund is registered, the fund manager name,  the company managing the fund, the companies or places which the fund is investing in. It is very important to qualify the credibility of the places where the fund is investing in. Do you recognize the companies that the fund is investing in? Do some background research about the fund and the companies it is investing in. Personally, I’m very hesitant to accept funds that are not older than 10 years (unless they are index funds).  
These signs are helpful in combination with the questions to determine if your advisor is telling the truth and/or is acting in your best interest. I think it is very important that a client is able to build up a trusted relationship with the advisor. In able to do that you first need to be able to feel comfortable and trust the advisor as a reliable source of information. Many times we also get this “feeling in the stomach” that something is wrong. I urge people to listen to their instinct and understand why they feel this way. Where is this coming from and is there a rational reason behind your doubts? I can never stress enough the importance of asking questions if you are unclear.

Many investors are relative novices and can be tempted to go along with the advisor’s suggestions rather than expose their own lack of understanding. If you are investing your hard earned money and time, you are always entitled to ask questions! There is really no stupid question, it could be the one that could save you from making a wrong decision. It is always better to work with clients who are more engaged and take an active role in their investments or financial planning.

What are your experiences? Please share them with me.

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