How can I recognize a shady asset manager?

I am busy choosing an asset manager to handle a large sum of money (my inheritance), but I have almost no experience with asset managers and am afraid of being taken for a ride.

What are the main traits which could help me recognize shady asset managers in order to avoid them?

Greetings,

Every branch of business has its share of unscrupulous dealers. Even well known financial services providers which are highly praised by the mainstream media sometimes turn out to be swindlers, as was the case with the internationally celebrated U.S. asset manager Bernard Lawrence Madoff.

Because of that, it is crucial that you choose your asset manager carefully. The following traits may hint at an unsrcupulous asset manager:

1. Unsolicited communications

You receive a spontaneous and unsolicited communication by email or phone, or even an in-person call at your home.

2. Exagerated profit estimates

Returns on investment are usually realtively modest - particularly if you do not take on a lot of risk - and this should be clearly communicated. If a financial services provider raves about fanatastic returns, you have reason to be leary - especially when they claim that there is little risk involved.

3. Untransparent costs or fees

Unscrupulous asset managers are typically untransparent. A good asset manager should clearly list and explain all possible costs and how they might affect your money.

4. Unsatisfactory answers

Unscrupuous asset managers often avoid answering complicated questions clearly and directly. Listen carefully to the way in which an asset manager answers questions. You should be able to fully understand exactly what they are talking about and get real answers to your questions. If they hide behind financial jargon or aren't capable of answering your questions to your complete satisfaction, you would probably be better off giving that asset manager a pass even if they are honest.

5. Putting you under pressure

No scrupulous asset manager will expect a person to hand over their wealth without sufficient preparation. If an asset manager in any way pressures you to make decisions or to sign an agreement, you should avoid that asset manager. Take your time and go slow when making this important decision.

6. Questionable contracts

Poor grammar or typos in written agreements are an obvious giveaway, but even impecably written and prepared contracts can hide a catch (or many). Read the agreement carefully at your own leisure and, if necessary, consult with an independent lawyer or financial advisor. Never sign a contract if there is anything in that contract which you do not understand.

Best regards from Moneyguru

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