The Red Flag That Should Make You Run From A Financial Adviser

Financial advisers are a common sight in the world of investments, retirement planning, and even real estate asset management. When managing personal finance obligations, there's a lot that can muddy the waters. From tax burdens to tax breaks to cash flow considerations, the help of a financial adviser can make the path forward much clearer. But not all financial advisers are people you should be working with. In fact, there's a distinct separation between two different types of advisers — one being a responsible actor working in your favor and the other acting as a sort of wild card. Speaking with Lawrence Sprung, CFP, author of "Financial Planning Made Personal," and founder of Mitlin Financial, we delved deeper into this divide.

Namely, Sprung talked us through one crucial piece of federal oversight that he would prioritize in order to enhance personal financial security for consumers. His major tip when choosing a financial adviser to work with revolved around the discrepancy between bona fide fiduciaries and financial advisers who hadn't taken this extra step.

It might not seem like a difference that's all that important, but a fiduciary is a financial adviser who's legally obligated to care for your needs. A typical financial adviser can act in their own self-interest alongside yours, while a fiduciary must only act to further your personal goals. Lawrence Sprung is passionate about this duty of care for personal finance customers. "We need to create an environment where financial professionals, regardless of their title or area of the profession they work in, are all held to the same standard of care that people expect from lawyers, doctors, and CPAs," he said.

Namely, Sprung notes that the "fiduciary standard should be required of all." While the standard "that is in place now has made some headway in this area," he laments the fact that "there is [still] a long way to go." Most financial advisers won't act blatantly against the interests of their clients, but without a fiduciary responsibility underpinning their approach, there's no actual responsibility to provide a quality service.

Common sense might lead some to think this can't actually be reality, but it's true, as hard as that might be to believe. For example, while a lawyer can't betray a client on moral grounds or to earn a quick buck on the side, a financial adviser who hasn't taken a fiduciary oath can, with no legal or financial blowback.

Direct contact with a financial adviser isn't the only arena that Lawrence Sprung is concerned with, however. He adds that social media personalities are another source of potentially fraught financial advice. Said Sprung, "I would also add, I believe there should be similar standards that are placed on advisers, implemented on those who are being compensated for giving financial advice on social media." For Sprung, the issue lies in the same lack of fiduciary duty that exists in some corners of the financial planning landscape.

"Many of the social media 'pundits' are unregulated, they answer to no one, and are pushing their agenda to generate revenue for their 'brand' without any regard for the end consumer," said Sprung. Influencers have long been accused of promoting products and/or services, based not on their true assessment of the thing but rather because the brand behind the offering is paying them for positive press. Sprung worries this same sort of misplaced priority can be found when it comes to financial advice dispensed on social media, due to a total lack of accountability. (Speaking of which, here's how much influencers make for mentioning sponsored products and services in their videos.)

Financial advice is freely unloaded in online spaces, but there's little that consumers can lean on to check into the realities of these suggestions. Like in the hard 70% rule for flipping houses compared to the fast-and-loose talk about the practice, investors, savers, and consumers, you should always be wary of talk that seems too good to be true online. Personalities here don't have a fiduciary duty to their listeners, so added research is always a requirement.