5 “Worst Practices” Every Financial Advisor Should Avoid

There are plenty of bad practices out there in the financial advisory space from conflicts of interest to being out of touch with your clients. But what should you avoid as a financial advisor when it comes to your own practice? Here a few bad practices all financial advisors should avoid:

Conflicts of interest

One of the worst mistakes any advisor can make is to work only for his own interest. Any relationship should be based on the solid foundation of trust and mutual respect. If the adviser is soliciting any financial transaction out of his own interest such as recommending mutual funds, annuities, or insurance products that pad their bottom line while possibly not being the best product for the client is not only unlawful and violating best interest fiduciary law, but outright unacceptable by any means and standards. The fiduciary responsibility and the best interest behavior should be upheld by state and federal law and be the cornerstone of advisory ethics.

Not explaining expectations vs reality

You cannot base an investment strategy on hope. During the financial crisis, most investors experience this the hard way while watching their asset values dropping far below a range where many projected their outcome. In such times dealing with customer expectations can be one of the most difficult and often frustrating aspects for financial advisors.

Although many clients may be quite reasonable when they lose money in their investments, there will always be a few who are determined to direct their frustrations at you; either by phone, by email, or even in person. There are, however, a number of things that advisors can do to help prevent most of these unpleasant moments and that’s through helping clients create expectations within the boundaries of reality.

It sounds nearly too simple, but when customers are better educated about what they can expect from their investments and their overall relationship with their advisors, they are less likely to be outraged by things that go beyond one’s control. While there will always be clients who can not be pleased, by properly educating your clients and setting realistic goals, a lot of conflict and dissatisfaction can be avoided.

Not being clear about fees

Let’s face it, people care a lot about what they’re paying and want to know exactly how much your services will cost. Vague and confusing payment structures can make people lose trust or faith in their advisor, which is the last thing you want when cultivating long-term business. If people can easily understand how you’re getting paid, whether through commission or percent of assets, they will be more inclined to trust you with their savings. Clearly explaining what people are paying and what they are getting for it is always the best way to go. Be sure to read our recent case study on Case Study: Comparing Your Fees to Other Advisors in Your Area Using Fee Benchmark Hidden Tool

Not asking your clients enough questions

When someone is looking for a financial professional, they usually want more than just someone that can help tell them what to buy and sell. They want someone to be there to guide them to their goals and retirement. Advisors need to be sure to ask their clients enough questions about their hopes, dreams, and long-term goals. Having a good understanding of this is extremely important for not only building a relationship, but making sure that you keep a consistent clientbase of people that trust and value your service. People come to financial advisors for guidance on how to navigate their finances to their end goals, so don’t forget to put yourself in a position to meet those expectations.


Advisors can be hard to reach because they are often busy in meetings or talking to other clients. However, if a client is paying for the services but doesn’t feel that they are important to the advisor than the client will take their money elsewhere.

It is normal for clients to have to leave a voicemail or an email, but the amount of time it takes to respond to the clients will indicate what level of priority the client is. Being unreachable or slow to reply is one of the worst practices for an advisor. Alternatively, being proactive and reaching out to clients will help to ensure a good relationship.

While there are plenty of other things that financial advisors should be looking out for, this short list is a great starting point to check against to make sure you don’t fall into some of them. Cultivating a good financial advisory practice involves always watching your own business practices to be sure you don’t fall into bad habits.

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