Can I trust my advisor?

Steve Merrell |

Q: I’ve been working with the same financial advisor for the past several years. My performance wasn’t very good last year and this year isn’t looking any better. I know COVID was hard on a lot of us, but I’m starting to wonder if my advisor is really doing the job for me. How do I know if I can trust the advice I’m getting?

A: I’m not sure if your real concern is your advisor’s trustworthiness, the quality of advice you are getting, or simply a short-term performance issue. Any of those could be ample reason to look for a new financial advisor, but you should clarify your thinking before you make a decision.


I am not making excuses for anyone, but even excellent advisors may have disappointing performance once in a while. I think it is noteworthy that Warren Buffett’s Berkshire Hathaway has underperformed the S&P 500 index 10 out of the last 26 years. In fact, he underperformed in 2019 and 2020 by a total of 36 percentage points. Yet even with those rough patches, he still managed to beat the benchmark for those 26 years. I have found that it pays to be patient when it comes to performance. 

On the other hand, patience is a problem if you are concerned about your advisor’s moral character. Some problems are only made worse by time. If you feel your advisor is not trustworthy or is not paying attention to your needs, you should part company as soon as possible.

Many people are skeptical of financial advisors. A few years ago, the Wall Street Journal reported on a nationwide opinion poll that showed more people trusted Uber drivers than stock brokers. The few professions that fared worse than stock brokers included advertising executives, used-car salesmen and members of Congress. I’m not sure that should give much comfort to stock brokers.

Some of those concerns are not necessarily misplaced. While most of the brokers I have known are honest people, there are exceptions. A 2016 study published by the Becker Friedman Institute at the University of Chicago highlighted reasons for concern. The study looked at the employment history of brokers registered with the Financial Industry Regulatory Authority (FINRA) in the United States between 2005 and 2015. Of the 1.2 million brokers studied, nearly 93,000 had a misconduct-related disclosure on their record. One-third of those were repeat offenders and past offenders were five times more likely to engage in misconduct than the average broker. What’s more, certain firms had significantly higher rates of broker misconduct than others, suggesting that some corporate cultures tended to encourage, or at least tolerate, bad behavior more than others.

You can check up on your broker and your broker’s firm at FINRA’s Broker Check website ( At the site’s landing page, you will be given the opportunity to choose between an individual or a firm. When you select “individual” and enter the name you are looking for, the website will tell you the broker’s years of experience, work history, licensing exams passed, and whether or not there are any disclosures.

Disclosures provide information about disciplinary events, customer disputes and financial matters such as personal bankruptcy. Some disclosures may not be for misconduct and some may involve pending actions including unresolved or unproven allegations. Broker Check will give you a summary explanation of the disclosure and the broker’s most recently submitted comments about the disclosure.

You can also tell a lot about your broker’s trustworthiness by thinking carefully about the recommendations he or she makes. For example, if your broker recommends buying a variable annuity in your IRA, get another broker. Most people buy variable annuities for tax deferral. However, IRAs already enjoy tax deferral so buying the variable annuity in the IRA would be redundant. The only one who would benefit from that transaction is the broker, who typically gets a much larger commission for selling a variable annuity. Other danger signs include excessive trading, trying to get you to make investments that you don’t understand, or recommending investments that simply don’t make sense for your personal situation.



Steven C. Merrell  MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to.