I recently met with a 26-year-old single woman with zero dependents. She makes $75,000 a year and was sold a $5,000,000 overfunded
permanent insurance policy where her annual premiums are $26,000. Without going into all the details, I can confidently say this woman was
taken advantage of by an insurance-slinging salesperson who calls themself a “financial advisor.” Unfortunately, this happens all too often.
The term “financial advisor” is used by many limited licensed insurance agents and stock brokers. Regulation Best Interest (BI) was approved
by the SEC on June 5, 2019 and by June 30th, 2020, all registered broker-dealers must comply with Regulation BI. This takes a step in the
right direction by limiting the use of the title “advisor” to properly licensed individuals. When interviewing a financial advisor, a client should
ask what licenses that advisor has. I recommend working with advisors who carry their FINRA Series 7 and State Series 66 licenses.

1. CONFUSING AN INSURANCE AGENT OR A STOCK BROKER WITH A FINANCIAL ADVISOR:

It is crucial to do your due diligence before working with a financial advisor. Even if you are already working with an advisor, I would still
recommend searching them. You can search an advisor on www.brokercheck.finra.org. BrokerCheck will show where the advisor has
worked, their licenses, and any disclosures they have. The disclosures consist of financial, criminal, and any customer complaints. Check out
their website and their LinkedIn profile.

2. FAILING TO DO A BACKGROUND OR REFERENCE CHECK:

A successful financial advisor should have a team of support staff behind them. It is impossible for an advisor to effectively manage all the
hats he or she must wear by themselves. There is not enough time in the day to do it all. Adding specialists to their team is crucial for each
advisor as they grow. At Sierra Ridge Wealth Management, I have an in-house portfolio analyst, a paraplanner, a marketing coordinator and
administrative staff. If an advisor does not have some of these internal resources you may want to think twice about placing your financial
future in their hands. Keep in mind that many advisors claim to have access to a portfolio analyst, but often this portfolio analyst lives halfway
across the country or is a third-party money manager. I am not saying a TPMM is bad but they do not fill the shoes of a local, in-house
portfolio analyst.

3. FAILING TO MEET THEIR TEAM:

A financial advisor should clearly articulate how they get paid and what your fees will cover, such as operating costs or compensation. It is
true that advisors often have different fee levels for different levels of service, but they should be able to clearly explain what those levels of
service are. Keep in mind it may take a meeting before the advisor can accurately assess your situation and quote you a fee. If you are not
sure if your advisor is being fully transparent about your fees, you should get a second opinion immediately. I always offer a complimentary
portfolio review that includes an analysis of what fees are being paid.

4. NOT TRULY UNDERSTANDING WHAT YOUR FEES ARE:

A financial advisor should clearly articulate how they get paid and what your fees will cover, such as operating costs or compensation. It is
true that advisors often have different fee levels for different levels of service, but they should be able to clearly explain what those levels of
service are. Keep in mind it may take a meeting before the advisor can accurately assess your situation and quote you a fee. If you are not
sure if your advisor is being fully transparent about your fees, you should get a second opinion immediately. I always offer a complimentary
portfolio review that includes an analysis of what fees are being paid.

 

Original content written by
JAMES SLAUGHTER
President & Founder
1435 River Park Drive, Suite 504
Sacramento, CA 95815 | 916-891-2557

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