20 Secrets Your Financial Advisor Won't Tell You

You've heard all of the clichés that financial advisors love to spout: "Make your money work for you!" "Stop earning money, start earning wealth!" They're all great sentiments, to be sure, and probably solid advice. But what about things going on behind the facade of that silk tie and well-pressed suit, which he or she isn't telling you?

If you're curious, read on to discover all of the things that your financial planner is keeping to him or herself. And before you book a consultation, you can always learn a little more about handling your hard-earned dough by reading up on the 52 Ways to Be Smarter With Money in 2018.

Before you start comparing different advisement services, it's important to know when to use a professional and when you can do it on your own. Especially around tax season. Postcard tax filing might not be here yet, but your situation is still likely far less complex than you think.

Asking around to make sure you've taken advantage of every tax break available to you might not be a bad idea. But if you only have one W-2 (or maybe two) and no other streams of income, you're probably better off doing it alone. And for more on taxes, check out The One Last-Minute Tax Move You Need to Know.

Know the difference in abbreviations. Certified Public Accountants (CPAs) go through state certifications to handle accounting, auditing, taxes, and consulting. Enrolled Agents (EAs), Certified Financial Planners (CFPs), and Tax Attorneys each have their own licenses and certifications as well, but narrows their expertise to more specific areas.

Unlike CPAs, EAs aren't required to go through rigorous testing, and aren't specifically trained as accountants. As such, they may not be able to give you full, well-rounded financial advice because they specialize in one area.

But here's the thing: EAs still must pass IRS competency tests in order to be legally authorized to do your taxes as a paid consultant. So if tax help is all you need, an EA might be your speed. At the end of the day, hiring an EA will likely save you a great deal of money, and they are plenty competent for your needs. And for more advice on saving money, check out these 40 Ways to Save 40 Percent of Your Paycheck.

Finance professionals go by many names—financial planner, insurance specialist, life coach, wealth manager, and more. So, what gives? Does the certification matter? It all comes down to the type of "advice" you'll be getting. The Motley Fool puts it this way: "Just because someone says they provide financial advice, it may not be that they actually provide financial advice. They might just be selling you something."ae0fcc31ae342fd3a1346ebb1f342fcb

You screen potential new hires, so why not for your potential financial advisor? Check the non-profit resource the Better Business Bureau for any issues or lawsuits involving the advisor or their financial firm. Do some homework with the Certified Financial Planner Board of Standards, Inc. to see if there are any problems with the advisor's license. The conduct an interview. It's okay to find out as much as you can about this person before hiring their help. You wouldn't give just anyone control over your financial stability, would you? And for more great interviewing advice, check out 20 Interview Questions Smart Bosses Never Ask Job Candidates.

Yes, most advisors offer discounts, even if they don't advertise them. Often times, all you need to do is ask. They have to somehow make a living too, so don't expect them to slash their fees in half for just any client. But asking your friends and family to refer you is one of the best ways to find a reputable advisor. Negotiations work best with established relationships.

Austin Galvez CPA from Haynie & Company notes that many people looking for a good advisor get hung up on finding someone close by. While this has always been the norm, the financial service industry is changing along with most other industries that are adopting remote business solutions. Galvez suggests that many pros are very comfortable with Skype, texting, and other remote means of communication. If you're partial to a certain advisor, don't let proximity be a deterrent.

Or at least, they shouldn't (insider trading is illegal, after all). Sure, they probably have much more experience in monitoring the market than you, but really, they don't know where the market is going and neither do you. You should never go into an investment without consulting an experienced professional, but you don't have to take their word as gospel, either. In theory, you can be on the same level as your advisor with solid research. To make sure you don't go into the game blind, follow these 10 tips on retirement savings.

If your advisor promises a certain amount of growth, this is a major red flag. There are countless factors that affect market growth, and markets will always be subject to a certain amount of volatility. Rule of thumb: if it sounds too good to be true, it probably is. Promises and guarantees are nothing but smoke when it comes to investments.

"I'm telling you, this product is going to be huge in 5 years." Yeah, we all secretly hope a friend will pull us in on the next Google or Apple right before the value skyrockets. Jeff Rose, CFP and author of Soldier of Finance said, "You know that stock tip your friend, family member, or co-worker has for you that is a 'sure thing?' Newsflash: it's not! I've had countless people approach me looking for my approval on some random stock tip that someone (usually with no investing experience) has given them the inside scoop on. Next time this happens, the easiest way to make money is to not invest in it."

They're sometimes called "hybrid" insurance policies, and usually refer to certain types of life insurance policies and annuities. Hybrid policies are meant to pay for long-term health care, should the holder need it. The major benefit is that you, as the holder, can get most of the money you pay toward the premium back if you get cold feet. (However, not all of it.)

Beneficiaries can receive a death benefit, but these policies don't earn a great deal of interest. Financial advisor Damon Gonzalez explains, "Because hybrid policies do so many different things, they aren't the best at any one thing." Adding the coverage can seem like a great perk, but can end up costing much more than the benefits. If you start early, a well-managed Health Savings Account (HSA) is a much better way to cover future health needs. Keeping your different insurance policies and your investments separate will help you maximize the benefits of each.

With health insurance, deductibles are relatively straight-forward. You pay out of pocket up to a certain amount, then insurance takes care of the rest. Unfortunately, not all types of insurance work the same. Kevin Courtright, licensed insurance specialist with The General Auto Insurance says, "Many people use deductibles for anything that happens to their car without realizing that it counts as a claim. Claims can stay on their record for 5 years and can also increase monthly rates. Some insurance carriers will even drop coverage if too many claims are filed. You'll be better off setting aside a small fund for vehicle maintenance and upkeep."

Again, no one can definitively predict the future. The "beat the market" strategy is high-risk and has a low probability for success. Tyler Gray, Financial Advisor at SageOak Financial said, "What about Warren Buffett? Doesn't he 'beat the market?' The reason Warren Buffett can beat the market is that he doesn't invest in businesses…he buys them. There's a big difference."

To be fair, every investment involves some level of risk. And higher risk means higher returns, right? Wrong. Very few people, even professional brokers, get rich from stock market trading. So why the appeal? It's exciting! Just the possibility of winning big is exhilarating! It has an element of Vegas to it.

But there's a reason they say "What happens in Vegas stays in Vegas." No one wants to face the consequences. Larry Solomon, CFP at OptiFour Integrated Wealth Management advises, "Keep costs as low as possible if you want to improve the likelihood of investment success." These costs include risk as well as management fees.

No matter how good the advice, how altruistic the motives, financial advisors are out to make money just like anyone else. At the end of the day, you are their source of income. A strong relationship with your advisor goes a long way, and loyalty is a big part of that. Their expertise is important, but you have power, too.

Don't be afraid to ask. Remember, you're trying to build a loyal, trusting relationship. Whether they make their money from commission or from fee-only service, you have the right to know. Craig S. Clark, CFP and President at Clark & Company Wealth Management says, "Certain investments are non-negotiable on price, like mutual funds, annuities, etc. However, advisors do have quite a bit of pricing discretion on advisory (fee-based) accounts. It doesn't cost an advisory that much more to manage $1 million vs. $250,000, so you should be able to negotiate a better fee."

Many advisors get commissions from partnered companies for selling products to their clients. This is legal with a broker's license. The commission is usually independent of the ultimate success of the investment, which means that advisors can actually get a kickback from putting your money into bad investments.

You're better off hiring a fiduciary. Fiduciaries have a legal obligation to ensure that all their work is done in your best interest, and to openly disclose if there is a possible conflict of interest with the products they sell.

Inflation is no new topic. But perhaps its worst side effect is how it affects your personal assets. Keep the Consumer Price Index (CPI) on your radar to follow the latest measure of inflation in the US. The average interest rate for savings and checking accounts is around 0.06%, and the latest CPI clocked in at 0.5%. You do the math. Now, don't start keeping your money under your mattress. Banks are still the best place for your money, and there are plenty of great investment moves to help mitigate any loss along the way.

Your broker will frequently advise you to trade. They have a plethora of tactics to instill the urgency, but remember, brokers are paid on commission. They make money when you buy or sell because this is when they charge their commissions. If your advisor gives you this type of advice, make sure you understand their motives.

We're used to the phrase 'you get what you pay for.' "But when it comes to financial advice and investing," Larry Solomon says, "the opposite is true. You get to keep what you don't pay for. Fees are the only thing we can predict and control in investing. Therefore, it behooves you to focus on what you can control and seek to drive down investment fees whenever and wherever possible." Keep the fees low, then use smart money moves to maximize the money you take home. For more advice on being smart with your money, learn the 40 Ways to Seriously Boost Your Savings After 40.

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