Financial Self-Defense: What to Know Before You Make a Decision Using a Financial Advisor

Using a financial advisor can be a good decision. But, before you select an advisor and in your dealings with the person you have selected, here are a few tips you should know before making a financial decision that could impact your retirement and your financial security.

The Certified Financial Planner Board of Standards has published the Consumer Guide to Financial Self Defense. The report lists “red flags” and “self-defense moves” that individuals can take if they run into any of the red flags. Here are a few examples of the moves they suggest.

  • Ask your financial advisor to tell you the organizations where he/she is registered – then check the organizations to see if there are any complaints filed. Brokers are registered by FINRA; investment advisors by either the SEC or state securities office; insurance agents by their state insurance commission; and Certified Financial Planners by the CFP Review Board.
  • Do not allow your advisor to complete forms for you, regardless of the paperwork burden. Also, ask your advisor to send you copies of any final, submitted documents.
  • Make sure you receive regular statements from independent third-party sources, such as the custodians of your assets. Compare these reports with any you receive from the broker or advisor.
  • Be suspicious of any pressure tactics or sales pitches when you are going through a major life change (e.g., death of a loved one, divorce, etc.). Avoid making important financial decisions for at least a year or two after a personal loss.
  • Do not believe anything that sounds too good to be true. For example, Bernie Madoff’s returns, when compared with the S&P 500 showed 3 losing months when the index had 26 and a maximum loss of 1.44% compared with the market’s maximum loss of 14.58%. Wayne McLeod (called “mini-Madoff” by Business Week) victimized federal law enforcement officers with his “special fund” that promised a tax-free yield of 8% from government bonds. Both Madoff and McLeod were running Ponzi schemes.
  • Do not invest until you fully understand the investment. Former SEC Chairperson, Chris Cox, said: “Never invest in anything you don’t understand.”
  • Know how the advisor is compensated. A fiduciary will tell you upfront if their compensation is based on the investment they are recommending. If your advisor does not tell you, be sure to ask.

As a federal employee, it is vitally important that your financial advisor understand federal benefits. What Every Federal Employee’s Financial Planner Should Know About Federal Retirement and Benefits tells you some of the things your advisor should know about your federal benefits in order to properly advise you.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at to discuss schedules and costs.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.