{"id":3588,"date":"2020-11-04T06:05:00","date_gmt":"2020-11-04T11:05:00","guid":{"rendered":"http:\/\/staging-prblog.paladinregistry.com\/blog\/?p=3588"},"modified":"2024-08-28T06:00:12","modified_gmt":"2024-08-28T10:00:12","slug":"track-record-financial-advisor-real-fake","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/","title":{"rendered":"The Track Record of a Financial Advisor: Is it Real?  Is it Fake?"},"content":{"rendered":"\n<p>When investors <a href=\"http:\/\/www.paladinregistry.com\/select\/how-it-works\" target=\"_blank\" rel=\"noopener noreferrer\">select a financial advisor<\/a>, one of their most frequent questions is, \u201cWhat performance can I expect if I select you?\u201d Very few financial advisors, who want to sell you investment products, are going to say, \u201cI don\u2019t know\u201d. They feel compelled to give you an answer about their track record because a non-answer could cost them a sale.<\/p>\n\n\n\n<p>Can you trust the performance numbers they give you? The answer is a resounding \u201cNo\u201d.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_68_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d0b0204d111\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d0b0204d111\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/#Valid_Track_Records\" title=\"Valid Track Records\">Valid Track Records<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/#Historical_Performance\" title=\"Historical Performance&nbsp;\">Historical Performance&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/#Performance_Expectations\" title=\"Performance Expectations&nbsp;\">Performance Expectations&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/#The_Hot_Fund_Approach\" title=\"The Hot Fund Approach\">The Hot Fund Approach<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/#References\" title=\"References&nbsp;\">References&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/#Realistic_Expectations\" title=\"Realistic Expectations\">Realistic Expectations<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Valid_Track_Records\"><\/span><b>Valid Track Records<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Legitimate track records have five primary characteristics:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>They are written. Verbal performance data is a sales pitch.<\/li>\n\n\n\n<li>The formula, that calculates performance, is <a href=\"http:\/\/www.investopedia.com\/terms\/g\/gips.asp\" target=\"_blank\" rel=\"noopener noreferrer\">GIPS\u2019 (Global Investment Performance Standard)<\/a> compliant.<\/li>\n\n\n\n<li>The track record is for all clients so the advisor does not select higher performing accounts and exclude lower performing accounts.<\/li>\n\n\n\n<li>An independent third party, who is a recognized expert, audits the track record.<\/li>\n\n\n\n<li>The\u00a0financial advisor practices full disclosure. For example, have all expenses been deducted from the track record?<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Historical_Performance\"><\/span><b>Historical Performance<\/b><b>&nbsp;<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every legitimate track record has a disclaimer at the bottom of the page. It says past performance is not an accurate indicator of future performance. Consequently, you should be very cautious when you select an advisor or buy a product solely based on past performance.<b>&nbsp;<\/b><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Performance_Expectations\"><\/span><b>Performance Expectations<\/b><b>&nbsp;<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a rel=\"noopener noreferrer\" href=\"http:\/\/www.paladinregistry.com\/investing\/performance\/realistic-expectations\" target=\"_blank\">Performance expectations <\/a>are a major marketing challenge for financial advisor. They know a high percentage of investors select advisors who create believable performance expectations.<\/p>\n\n\n\n<p>Consequently, creating expectations is a highly evolved sales skill. Advisors are adept at creating performance expectations that are supposed to reward investors for the risk and expense they incur when they invest their retirement assets in the securities markets.<\/p>\n\n\n\n<p>Most investors do not question 2% expenses and the risk of large losses if they believe they will earn annual returns of 15% or more.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Hot_Fund_Approach\"><\/span><b>The Hot Fund Approach<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Some advisors create fake track records using the performance of mutual funds and other types of money managers. They claim they selected the funds or managers before the performance occurred knowing you have no way to validate undocumented sales claims.<\/p>\n\n\n\n<p>Your risk is the advisor selected the funds after the performance occurred. Anyone can do that. Therefore, the advisor is not the expert he claims to be. In fact, he is an aggressive salesman with questionable ethics and a fake track record.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"References\"><\/span><b>References<\/b><b>&nbsp;<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Another popular sales tactic is to use references to create track records. For example, an advisor tells you his clients average an annual return of 18% per year. You contact three advisor references who all claim they have averaged 18% a year since they began following the advisor\u2019s investment recommendations.<\/p>\n\n\n\n<p>Do not make decisions based on the input of references. No advisor will provide a bad reference who does not confirm his sales claims. He may have a personal relationship with his references. Some advisors coach references to make the right comments.<\/p>\n\n\n\n<style type=\"text\/css\">\r\n  .articles-ad-page {\r\n   border-top: 1px solid #ADADAD;\r\n   border-bottom: 1px solid #ADADAD;\r\n   padding: 15px 0;\r\n   margin-bottom: 10px;\r\n   display: block;\r\n  }\r\n\t.articles-ad-page {padding: 10px 5px; border-top: 1px solid #BEBEBE; border-bottom: 1px solid #BEBEBE; margin-bottom: 20px;\t}\r\n\t.articles-ad-page img {float: left; margin-right: 20px; max-width: 140px; margin-top: 5px; margin-bottom: 5px; border-radius: 0;}\r\n\t.articles-ad-page .txt {line-height: 21px; margin-bottom: 0; font-size: 14px; margin-top: 4px; }\r\n  .articles-ad-page .txt p{font-size: 14px;}\r\n  .articles-ad-page .txt p a{color: #035184 !important; font-weight: bold; text-decoration: none;}\r\n  .spocored-text{color: #cac5c5; font-weight: 500; float: right; font-size: 12px;}\r\n  .wa-text{color: #183a68; font-weight: bold; float: left; font-size: 12px;}\r\n  .articles-ad-page .alignleft{ float:left!important;}\r\n  .txt-head{margin-bottom: 2px; text-align: left; margin-top: -6px;}\r\n  .txt-text{margin-bottom: 14px;}\r\n  @media screen and (max-width:767px) and (min-width:320px){\r\n      .articles-ad-page .txt-head {margin-top: -15px; float: left; width: 50%;}\r\n      .articles-ad-page .txt {width: 100% !important; margin-top: 12px;}    \r\n      .articles-ad-page { display: block;}\r\n    }\r\n  @media screen and (max-width: 360px) and (min-width: 320px){\r\n    .articles-ad-page .txt-head a {\r\n        font-size: 16px!important;\r\n        line-height: 16px!important;\r\n    }\r\n    .articles-ad-page .txt-head{\r\n        margin-right: 14px;\r\n            width: 45%;\r\n    } \r\n    .articles-ad-page img{ margin:0 10px 10px 0px!important;}\r\n  }\r\n<\/style>\r\n\r\n\r\n<p><span class=\"spocored-text\" >SPONSORED<\/span> <span  class=\"wa-text\">WISERADVISOR<\/span><\/p>\r\n<div class=\"clearfix\"><\/div>\r\n<div class=\"Articles-ad-page\"><img decoding=\"async\" class=\"alignleft-new\" style=\"margin-top: 0px;\" src=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2023\/03\/ads-image-1.jpg\" alt=\"ad_article\" width=\"\" height=\"\"><p><\/p>\r\n<div class=\"txt-new\">\r\n<p style=\"margin-bottom: 22px;\"> <a href=\"https:\/\/www.wiseradvisor.com\/match_advisors.asp?kwd=paladin-blog-ad-track-record-financial-advisor-real-fake&amp;utm_medium=middle\" style=\"color:#035184;     font-size: 20px;font-weight: 700; text-decoration: none;\" target=\"_blank\" rel=\"noopener noreferrer\">Need a financial advisor? Compare vetted experts matched to your needs. Compare credentials and fees.<\/a><\/p>\r\n<p>Choosing the right financial advisor is daunting, especially when there are thousands of financial advisors near you. We make it easy by matching you to vetted advisors that meet your unique needs. Matched advisors are all registered with FINRA\/SEC.  <a href=\"https:\/\/www.wiseradvisor.com\/match_advisors.asp?kwd=paladin-blog-ad-track-record-financial-advisor-real-fake&amp;utm_medium=middle\" target=\"_blank\" style=\"font-weight: 700;    color: #035184;\" rel=\"noopener noreferrer\">Click to compare vetted advisors now.<\/a><\/p>\r\n<\/div>\r\n<div class=\"clearfix\"><\/div>\r\n<\/div>\r\n\r\n\r\n\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Realistic_Expectations\"><\/span><b>Realistic Expectations<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Seven <a href=\"http:\/\/www.paladinregistry.com\/about\/about-us\" target=\"_blank\" rel=\"noopener noreferrer\">Paladin<\/a> tips will help you develop realistic performance expectations.<\/p>\n\n\n\n<p>1. Look at performance data. Ask the right questions to determine if the data&nbsp;is legitimate or a sales ploy.<\/p>\n\n\n\n<p>2. Do not assume future returns will be the same as past returns.<\/p>\n\n\n\n<p>3. Develop a long-term investment strategy that is based on conservative performance principles that focus on diversification, risk management, and reasonable expenses.<\/p>\n\n\n\n<p>4. Avoid short-term strategies that are based on crystal ball predictions.<\/p>\n\n\n\n<p>5. <a href=\"http:\/\/www.paladinregistry.com\/investing\/asset-classes\" target=\"_blank\" rel=\"noopener noreferrer\">Diversify your assets into multiple asset classes<\/a> for two reasons. A percentage of your assets are invested in higher performing classes and you reduce your risk of large losses.<\/p>\n\n\n\n<p>6. Make sure your exposure to risk matches your tolerance for risk. Your principal risk is not volatility. It is large investment losses.<\/p>\n\n\n\n<p>7. Every dollar of expense is one less dollar you have available for reinvestment and your future use. Require documentation for reasonable expenses that are fully disclosed to you.<\/p>\n\n\n\n<p><em><a href=\"https:\/\/www.paladinregistry.com\/blog\/author\/jack-waymire\/\">Jack&nbsp;Waymire<\/a> worked in the financial services industry for 28 years before he left to found the Paladin Registry (<a rel=\"noreferrer noopener\" href=\"http:\/\/www.paladinregistry.com\/\" target=\"_blank\">www.PaladinRegistry.com<\/a>) in 2004. This investor education website was based on the Principles in&nbsp;Jack\u2019s first book:<\/em> <em>&#8220;Who\u2019s Watching Your Money?&nbsp;The 17 Paladin Principles for Selecting a Financial Advisor.&#8221;&nbsp;<br>The Registry also has a free service that matches investors to advisors who meet Paladin\u2019s minimum requirements for competence and trustworthiness.<\/em><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When investors select a financial advisor, one of their most frequent questions is, \u201cWhat performance can I expect if I select you?\u201d Very few financial advisors, who want to sell you investment products, are going to say, \u201cI don\u2019t know\u201d. They feel compelled to give you an answer about their track record because a non-answer could cost them a sale. Can you trust the performance numbers they give you? The<\/p>\n","protected":false},"author":2,"featured_media":3592,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[325],"tags":[],"class_list":["post-3588","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-advisors"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Track Record of a Financial Advisor: Is it Real? Is it Fake?<\/title>\n<meta name=\"description\" content=\"Financial advisor feel compelled to give you an answer about their track record. Is it the truth ? Follow 7 tips for realistic performance expectations.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.paladinregistry.com\/blog\/advisors\/track-record-financial-advisor-real-fake\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Track Record of a Financial Advisor: Is it Real? Is it Fake?\" \/>\n<meta property=\"og:description\" content=\"Financial advisor feel compelled to give you an answer about their track record. Is it the truth ? 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