Planning a future often requires turning to a financial adviser as the fiduciary for guidance with general personal investing, college trusts, income tax preparation, insurance, retirement planning or even estate planning. Most financial advisers strive to help their clients invest their money in areas that generate rich returns because they themselves tend to accrue commission on the positive returns. The more money financial advisers can make for their clients, the more money they are able to make for themselves. However, there are certain practices some financial advisers partake in to cheat their clients. The following are four warning signs to look for when trusting your financial adviser with your money.


If your financial adviser commingles or adjoins his name, alongside yours, on the title of your investment account, it grants him unrestricted authority to use the funds at his discretion. Ensure all the statements you receive from the custodian have only your name appearing on the account. The code of ethics for the Certified Financial Planner Board of Standards, Inc. outlines commingling as a violation of the SEC’s Code and Practice Standards, whereby any violation warrants disciplinary action such as potential revocation for the certificate holder to use the CFP certification marks after his name.


If on your statement, you notice a large number of trades occurring or an increase in transactions on your account without any substantial increase in value, your financial adviser could be churning on your account. A financial adviser, or specifically broker, does this to increase his own commissions as he is usually paid whenever he buys and sells a security. A way to avoid churning on your account is to open a wrap account where a flat fee is charged periodically instead of one based on trade transactions.


If your financial adviser tells you of an investment that offers you a high return with low risk, and you instead notice your returns are staying pretty consistent, your investment could be tied into a Ponzi scheme, which generates returns for former investors by using the funds from newer investors. Moreover, Ponzi schemes are often a part of affinity fraud, which entails inflicting the scam upon members of certain groups, such as an ethnic community, religious community or the elderly. To avoid this, confirm that your investments and financial advisers and their respective firms are registered with the SEC, since the majority of Ponzi scheme investments involve unregistered firms.


If your financial adviser insists you play a minimal role in your investments and let him deal with the "burden" of your account, since it is his job, he likely wants to obtain from you a power of attorney to act on your behalf for decisions involving your investments. This opens up great risk for the safety of your assets since your financial adviser is then able to legally trade upon your securities and move the return or the security itself into any account he chooses. To your greater detriment, your adviser could also transfer your money into his personal accounts, and although this act is illegal, it is costly and timely for you to pursue after the fact. To avoid this happening, never grant power of attorney to your adviser. If you must, however, stipulate in a power of attorney agreement that upon granting power of attorney, your financial adviser is only permitted to trade your securities without notifying you but never permitted to draw upon returns or move assets from their original accounts. To protect your investments, be cautious when entrusting your money to others. Always validate your financial adviser's credentials, background and ethics record.