Red Flags to Look Out For in The Financial Advice Industry

“Financial freedom is available to those who learn about it and work for it” — Robert Kiyosaki

3 min read

Red Flags to Look Out For in The Financial Advice Industry

“Financial freedom is available to those who learn about it and work for it” — Robert Kiyosaki

3 min read

When it comes to managing your finances effectively, there are essential truths about money and the financial services industry that can significantly impact your financial future. It’s an unfortunate truth that not all Financial Advisers out there are looking out for your best interests and instead wish to line their own pockets.

Whilst the industry is home to many reputable professionals and institutions, there are ‘red flags’ that individuals should be aware of to protect their financial well-being.

In this article, we’ll explore key red flags to watch for in the financial advice industry to help you make informed decisions and safeguard your financial interests.

1. Lack of Transparency

Transparency is paramount in financial services. Be cautious if a Financial Adviser, institution, or investment product is not forthcoming with information about fees, risks, or terms and conditions. Reputable professionals and firms should provide clear, easy-to-understand disclosures to help you make informed choices.

2. Promises of Guaranteed Returns

Beware of any financial entity that promises guaranteed high returns on investments, or ‘get rich quick’ schemes that will double your money within a year.

No investment is entirely risk-free, and high returns typically come with higher levels of risk. Legitimate Financial Advisers emphasise the importance of diversification and managing risk rather than making unrealistic guarantees.

There is no crystal ball, and nobody can tell the future with 100% certainty. However, if you do speak with a financial professional and they are expressing the future with 100% certainty, it is best to look elsewhere.

3. Pushy Sales Tactics

If you encounter a financial professional who uses high-pressure sales tactics or pushes you to invest in a particular product or service without thoroughly explaining it, exercise caution. Trustworthy Advisers should take the time to understand your financial goals and risk tolerance, tailoring their recommendations accordingly. There should be no instance where you are rushed to make a decision or dismissed when you ask questions.

Everything should be laid out clearly so that you understand where your money is going.

4. Lack of Credentials or Licensing

Always verify the credentials and licensing of financial professionals and institutions. Unregistered or unlicensed individuals should raise immediate concerns. Reputable Financial Advisers typically hold recognised certifications and are registered with regulatory authorities. In Switzerland this will likely be FINMA or an authorised subsidiary. In the UK this will be the FCA.

5. Complex Investment Strategies You Don't Understand

Avoid investments or strategies that are deliberately over-complex or that your Adviser refuses to fully explain. If a Financial Adviser cannot explain an investment in straightforward terms, it may not be the right choice for you.

As before, understanding where your money is going is essential to making informed decisions.

6. Handling Client Money

Handling client money refers to the act of having your money go to the bank account of the Adviser or Adviser’s company before it is invested. As obvious as it may seem, this is to be avoided as as it significantly reduces the security of your hard-earned funds. We highly recommend against using Advisers or firms that keep your money in their own bank accounts. Typically, your funds should be held with a custodian in a similar arrangement to a trust with you (the client) as beneficiary. This means that should the firm you are dealing with (either the Adviser firm or custodian investment firm) cease trading, your funds remain yours.

Patterson Mills will not handle any client money and this ensures our clients benefit from enhanced security and further peace of mind.

7. Frequent Turnover of Advisers or Staff

A revolving door of advisors or staff at a financial institution can be a red flag. It may indicate internal issues or a lack of commitment to client relationships. Consistency in your advisory team can foster trust and continuity in your financial planning.

8. Overly High Fees

Excessive fees can erode your investment returns over time. Pay close attention to the fees associated with investment products or services. Compare fee structures and seek options that offer competitive pricing without sacrificing quality.

9. Unwillingness to Provide References

If a financial professional or firm hesitates to provide references from satisfied clients or fails to provide evidence of their track record, proceed with caution. Hearing from other clients or seeing reviews on their website can offer valuable insights into their experience and results.

Patterson Mills Protecting Your Financial Interests

The financial advice industry is a vast and diverse landscape, and while it holds countless opportunities, it also harbours potential risks. Being vigilant and watching for these red flags can help you navigate this landscape with confidence.

Trustworthy financial professionals and institutions prioritise your financial well-being, adhere to ethical standards, and prioritise transparency.

Remember that due diligence is your best ally in safeguarding your financial interests. Take the time to research and verify the credentials and reputation of Financial Advisers and institutions you choose to work with. By staying informed and attentive, you can make sound financial decisions that align with your goals and aspirations.

To ensure your financial interests are protected now and into the future, get in touch with us today and book your initial, no-cost and no-obligation meeting. Just send us an e-mail to or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all information within this article has been prepared for informational purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.