NO-NO #1: NEVER WRITE A CHECK MADE PAYABLE TO YOUR ADVISOR, OTHER THAN FOR THEIR FEE.
When investing money, your checks should only be made out to brokerage firms, the custodian, or insurance companies.No legitimate advisor would ever allow a client to write a check for investments or insurance payable to them personally or his firm.
NO-NO #2: NEVER ALLOW YOUR ADVISOR TO LIST THEMSELVES AS A JOINT OWNER, BENEFICIARY, OR TRUSTEE ON YOUR ACCOUNTS.
This money is yours, not your advisor's. There is no legal or procedural reason why the advisor should be listed.
NO-NO #3: NEVER LEND MONEY TO YOUR ADVISOR.
There are rules and regulations against loans to an advisor. Also, you don't want to complicate the relationship.
NO-NO #4: NEVER LET YOUR ADVISOR SIGN YOUR NAME TO ANY DOCUMENT.
Many transactions and documents require your signature. If you need to transfer money or need to submit another form you might be tempted to bend the rules. Don't. Forgery is a felony.
NO-NO #5: NEVER LET YOUR ADVISOR ALLOW YOU TO SIGN A BLANK FORM OR CONTRACT.
It is a violation of securities regulation rules and not a smart thing to do. You need to know what your putting your signature on at all times.
For privacy considerations, it is common for an advisor to send documents that omit account numbers and social security numbers. It's fine to sign such forms. Your advisor will fill in the missing information after you return the forms. This step is designed to reduce the risk of identity theft.
NO-NO #6: NEVER LET YOUR ADVISOR LIST THEIR FIRM’S ADDRESS TO RECEIVE ACCOUNT CORRESPONDENCE.
You should receive monthly or quarterly statements and tax documents directly from the custodian, brokerage firm, or insurance company. Never let your advisor arrange for the statements to go to his office instead of you.
NO-NO #7: NEVER LET YOUR BROKER OR ADVISOR SELL YOU AN INVESTMENT THAT ISN’T AVAILABLE FROM OTHERS.
Some advisors sell in-house or proprietary investment products. There's only one reason they do that and that's because they earn higher compensation for doing so. All investments your advisor recommends should be available from numerous sources.
NO-NO #8: NEVER LET YOUR ADVISOR RECEIVE A SHARE OF YOUR PROFITS.
The advisor isn't going to reimburse you for losses so, why should they share in your profits.
It's your money so you should keep all of it.
NO-NO #9: NEVER LET YOUR ADVISOR ASSIGN ANY AGREEMENT WITH YOU TO ANOTHER ADVISOR.
At some point, your advisor will retire or sell their practice. When it happens you are relieved of any and all contractual obligations you may have had with him or her. You are not obligated to work with their successor or their firm. This is also a violation of security law.
NO-NO #10: NEVER LET YOUR ADVISOR INVEST YOUR MONEY IN SOMETHING YOU DON’T UNDERSTAND OR OVERLY COMPLEX.
If you don’t understand an investment or a strategy, don’t invest in it. Investments that are complex, with numerous layers are generally high risk and can have big losses. These types of investments were a big problem for institutions and individuals in 2008.