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3 Red Flags a Financial Advisor is Bad

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3 Red Flags a Financial Advisor is bad

Financial advisors can be a blessing or a curse.

They certainly fulfill needs for many who struggle to understand and practice finances.

If you’re making a living wage but can’t stay under budget, you might need a financial advisor. If you’re considering investing money but don’t know where to begin, you might need a financial advisor.

But not all financial advisors are worth hiring.

Some put their own interests before yours. Some simply don’t know what they’re doing.

So the question is: how do I avoid the bad ones?

Here’s a list of red flags to look out for. If a financial advisor has one or more red flags, they may be a bad choice.

1. They aren’t certified

Certification may differ depending on the advisor’s specialty. If you’re looking for a financial planner, a common designation is a Certified Financial Planner (CFP).

Check out their personal website. Typically they have a section that explains their education and experience.

Never be afraid to ask a financial advisor if they’re certified. You may want to do additional research to properly understand their certificate.

Does the certificate come from a trusted source? Is the certificate related to the specific work you’re asking for?

Research the requirements to obtain and maintain the certificate. What are the initial requirements to get the certificate? What does it take to maintain the certificate?

These answers show a financial advisor’s education and willingness to improve their skill.

If they have multiple certificates that’s a good sign. If they can’t produce a certificate, consider hiring someone else.

2. They aren’t a fiduciary

A fiduciary is a financial advisor who has pledged to look after the client’s best interests.

Some advisors are only held to suitability standards.

A suitability standard means the advisor is not obligated to look out for a client’s best interest. It implies they make suitable recommendations for you.

If a financial advisor is a fiduciary it’s not a guarantee they will look out for your best interests.

But if a financial advisor is not a fiduciary beware.

The best course of action is to analyze the person to see if they practice fiduciary standards.

Don’t be afraid to ask, “Are there areas where you are not held to a fiduciary standard?”

Also, figure out when they became a fiduciary and when they became a financial advisor.

Let’s say they’ve been a financial advisor for 2 decades, but only became a fiduciary 6 months ago.

It’s possible the advisor didn’t practice fiduciary standards for a long time, and only recently became one in title.

3. They can’t pass a background check

Research a financial advisor before hiring them.

Start with Googling them, but go beyond that. Don’t be afraid to ask direct questions, such as “Have you ever been convicted of a crime?”

If a financial advisor was convicted of a crime I don’t need to tell you that’s bad news.

Also ask if they have ever been under investigation by any organization, even if they were found innocent.

If a financial advisor has been under investigation you may want to research that incident.

Investigations do not imply guilt, but they should give you pause.

Financial advisors should also be able to provide references of current clients. Verify them and ask other clients what it’s like to work with this particular financial advisor.

When checking references try to find current clients who are using the same service as you.

If you plan to use this advisor for financial planning, ask for a client who is also using the advisor for financial planning.

How long have the clients been with this financial advisor? Are they satisfied? Do they feel the advisor has their best interest in mind?

Researching a financial advisor takes time and effort, but it’s a necessary precaution.

It keeps you safe and gives you peace of mind.

Does your financial advisor have a red flag?

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American Consumers Will (Or Won’t) Drive The Economic Recovery

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American Consumers Will (Or Won’t) Drive The Economic Recovery

If you are wondering how the stock market has climbed nearly 30% from the March 23 lows while the country has lost 20 million jobs in April, you’re not alone.

It’s head-scratching to try and think of a scenario where stocks are worth as much or almost as much as they were back in February when the country had a 3% unemployment rate compared to 14.7% today.

A common refrain from analysts and Wall Street veterans is that the stock market is forward-looking. So everything bad happening today has already been priced in. Or perhaps with parts of the country slowly reopening, that the economy will quickly spring back to life. Maybe there’s justifiably a belief that no matter how bad things get, the Federal Reserve will step in and flood the market with liquidity, effectively removing any downside risk.

Consumers

Whatever the real reason is for the surge in stock prices since late March, there’s one thing that many analysts say will either spur the market higher or send it crashing back down to the March lows: you and me, the consumer.

“It’s all going to come down to consumer spending. If we’re all sitting inside and not out spending money in September-October, the market’s not going to like that — the market will go down,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute, in a recent interview.

Consumer spending accounts for roughly 65% of our country’s GDP. So if consumers don’t feel comfortable leaving their homes and getting back out to shopping centers, malls or restaurants, it’s going to be nearly impossible for a sustained economic recovery.

Richard Cordray was the first director of the Consumer Financial Protection Bureau. He says consumers “are likely to come out of the covid-19 crisis no longer able, or willing, to bear the same load as before. That means that Wall Street investors counting on ordinary families to continue propping up the business cycle are likely to be sorely disappointed.”

“First, the rapidly deteriorating job market will hurt consumers badly, and for many the damage will not be temporary. Until last month, unemployment was at historic lows: It was 3.5 percent in February. More hours worked meant more income for most families while pushing the wage curve higher. All that positive momentum is gone. Unemployment is certain to spike above 15 percent soon, and many small businesses that operate on thin margins will go bankrupt.

“Second, many businesses will not regain the same vigor because they are dependent on strong consumer demand. Inevitably, some Americans will remain unemployed longer than others. Those who go back to work quickly are still likely to emerge from their experience of sheltering at home with less ability to resume spending at the same levels. Large numbers of households are falling behind on major debt obligations, such as rent or mortgage payments, auto loans, and credit card bills. Even those who return to pre-crisis jobs will have to cope with the burden of this overhanging debt, which will constrain their discretionary spending for months or even years to come.

“Third, the wrenching experience of the covid-19 pandemic is likely to change many consumers’ behavior. As happened in the Great Depression, this crisis has reminded people of the fragility of their financial situations, making them more cautious about borrowing and spending. Social changes, too, are likely to linger. Until people feel sure about an effective vaccine and manageable treatment for the virus, they may be reluctant to travel or even to circulate as widely as they used to, producing lower levels of economic activity overall.”

The Effects of Job Loss

And Avi Dan, the CEO of Avidan Strategies, says the damage from the unprecedented job losses could last for years in what he calls “America 2.0”

“After most recessions had ended, consumers’ attitudes and behaviors often return to “normal” within a couple of years. This time it may be different. Given the unprecedented extreme events we are witnessing, consumers’ optimism just might be replaced by a heightened sense of economic vulnerability. Caution might replace consumerism, and this could persist for a decade or longer.

“Given these facts, there is a good possibility that consumer attitudes and behaviors, shaped during this recession, will linger substantially beyond its end, as we enter a new national phase, America 2.0. The majority of consumers may well retain the different consumption habits developed during the recovery with what they’ve adapted to during the recession.”

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Unemployment Rate Balloons To 14.7%, Expected To Get Worse

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Unemployment Rate Balloons To 14.7%, Expected To Get Worse

April’s jobs report is out, and it shows a stunning 20.5 million jobs were lost last month, ballooning the unemployment rate to 14.7%. This mirrors Wednesday’s report from ADP that showed 20.2 million private-sector jobs were lost.

Economists expected a reading of 21.5 million jobs lost, according to Dow Jones.

The 14.7% unemployment rate is the highest our country has faced since the end of World War II.

“This is the biggest and most acute shock that we’ve seen in post-war history. It’s a dramatic loss of output in a very short period of time,” said Michelle Meyer, head of U.S. economics at Bank of America.

Meyer anticipated a loss of 22 million nonfarm payrolls and an unemployment rate of 15%. The industry hit hardest by job losses was the service industry. About 8.6 million jobs were lost in leisure and hospitality, and Meyer warns that it’s unknown how quickly those jobs will come back.

“In recession, the service side tends to be a lot more resilient. This time around, the services are in the epicenter, given how the Covid pandemic has impacted the economy,” she said. “Usually it’s the cyclical, more externally oriented parts of the economy. There’s a question of how quickly the service sector can come back after this.”

Expected Peak

Mark Zandi, chief economist at Moody’s Analytics, expects that job losses will peak in the coming weeks, but the headline unemployment rate could be an eye-popping 20% in May.

He says that if we don’t get a second wave of infections as the country re-opens, the unemployment rate will quickly drop by the fall, but doesn’t expect a full recovery until there’s a vaccine.

“Then we’ll get a bounce if we don’t get a second wave [of infections] in the summer months. The unemployment rate will be cut in half by Election Day. Then we go nowhere fast until there’s a therapy we all feel good about — not only a vaccine but one that’s widely distributed.”

He expects the economic impacts to linger and companies will be forced to make hard decisions about opening or permanently closing, and what their staffing needs will be.

“It’s just the pervasive uncertainty. The virus is still out there and can come roaring back. People just won’t be traveling, business won’t be investing. There won’t be the same kind of global trade. People just won’t get back to normal. People will be distancing,” said Zandi.

He added, “There’s going to be a lot of business failures and bankruptcies. You can already see it. They’re going to be in such a weakened state they aren’t rehire the people they had before.”

Not a Clear Picture

Minneapolis Federal Reserve Bank President Neel Kashkari was on NBC’s Today Show yesterday. There, he warned that today’s jobs report doesn’t give the clearest picture of job losses amid the coronavirus pandemic.

“That bad report tomorrow is actually going to understate how bad the damage has been,” Kashkari explained, adding that the reported unemployment rate could be as high as 17% — a brutal number, no doubt — but he says the true number may be as high as 24%. “It’s devastating,” she then said.

Meyer, for her part, hopes the number is lower, for no other reason than our nation’s psyche.

“There are a few metrics that Main Street pays attention to. One is the S&P 500, and the second one is what is the unemployment rate,” she also mentioned.

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China Coronavirus Outbreak Impact on Travel Insurance, Explained by Squaremouth

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China Coronavirus Outbreak Impact on Travel Insurance, Explained by Squaremouth
Image via Shutterstock

In response to the Coronavirus outbreak, The Center for Disease Control has issued a Level 3 Warning and the U.S. Department of State has issued a travel advisory for the affected destinations.

Travel insurance comparison site, Squaremouth, reports an influx of calls from current policyholders wanting to cancel trips to affected destinations, as well as travelers now wanting to purchase a travel insurance policy.

As the situation progresses, Squaremouth explains travel insurance coverage for the Coronavirus outbreak.

Travelers who have already purchased a policy:

Unfortunately, there is limited cancellation coverage under most standard travel insurance policies.

Travel Warnings for China Don’t Activate Cancellation Coverage

Virus outbreaks do not fall under the standard cancellation reasons on most travel insurance policies. While travelers are advised not to visit affected destinations, they are not prevented from doing so. In simple terms, travel insurance cancellation benefits are designed to reimburse travelers who are preventing from traveling due to a specific list of reasons, like weather or an illness.

Popular Attraction Closures Not Covered Reason to Cancel

Travelers with visits planned to unaffected areas in China may still feel the effects of the outbreak, due to many popular tourist attractions closing in efforts to stop the spread of the virus. While the closure of portions of the Great Wall of China, Hong Kong Disneyland and Shanghai Disneyland may be an inconvenience to travelers, it isn’t enough to trigger cancellation benefits.

Benefits Available If Traveler Contracts Coronavirus

If a policyholder contracts the virus before their departure, they may be covered to cancel their trip entirely under a standard policy. In addition, if a traveler falls ill with the coronavirus while on their trip, they can be refunded for medical expenses and, if medically necessary, be covered to end their trip early and return home.

Travelers looking to purchase a policy now:

Travelers looking to purchase now may need upgraded coverage.

Coronavirus Considered Foreseen

Any time an event becomes expected and commonly known about, insurance providers can restrict coverage for that event.

Some travel insurance providers are now excluding the Coronavirus outright, meaning there are no cancellation or medical benefits available for policies purchased after their defined “cut-off date”. According to Squaremouth, this is as early as January 21st, depending on the provider.

Cancel for Any Reason Upgrade Best Option for Future Trips

Travelers still planning their trips, or who booked within the past 3 weeks, may be able to purchase a policy with the Cancel for Any Reason upgrade. While this time sensitive benefit only reimburses a portion of the trip cost, it is the best option for travelers who have concerns that a standard policy doesn’t cover, including fear of traveling.

Squaremouth recently launched the China – Coronavirus Outbreak Travel Insurance Information Center to explain coverage for the virus outbreak. This page is regularly updated by Squaremouth’s travel insurance experts, and includes answers to frequently asked questions and official statements from providers.

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