Trust is hard. And when money’s in play, it can be even more difficult.

In the world of personal finance, many of us rely on statured professionals to help us make sense of it all. But if they know what we don’t, how can we be sure that they are competent and trustworthy experts who won’t take advantage of us?

Sadly, there are scoundrels who see opportunity in this knowledge gap between experts and the individuals who turn to them. Of particular concern to us at the CFP Board are those individuals who offer financial advice with no thought to helping clients, but only helping themselves. 

The number of these bad actors is fortunately small, but the damage they can wreak on people’s financial security can be staggering. It can take just one mastermind — such as a Bernie Madoff or Allen Stanford — to bilk billions of dollars from tens of thousands of investors.

In 2010, the CFP Board published the Consumer Guide to Financial Self-Defense to help those working with financial advisors avoid becoming victims of fraud or malpractice. While trust plays an important role in the relationship between an individual and his or her advisor, this trust should not be blind.  

To this end, the CFP Board provided 10 red flags to alert consumers to situations where they might be vulnerable to financial abuse, and in plain-English, easy-to-implement advice for protecting themselves:

  • Do Your Homework

  • Fill in All the Blanks

  • Beware of Rogue Advisors

  • Make Sure It Adds Up

  • Don’t Give Away the Keys

  • Step Back

  • Look for the Downside

  • Don’t Let Yourself Be Pressured

  • Follow the Money

  • Ask, Ask, and Ask Again

In August 2013, the CFP Board published the second edition of the Consumer Guide with updated facts and figures on the prevalence and impacts of financial abuse, along with the same solid guidance on how to identify and avoid it.  The Consumer Guide has been widely recognized as an important consumer tool, and is included in the Consumer Information Catalogue, distributed by the U.S. General Services Administration.

An online version of the guide can be accessed on Let's Make a Plan, as well as information on CFP Board’s mission to protect and benefit consumers by setting certification standards and ethical requirements for financial planning professionals.

As the wise saying goes, “Trust, but verify.”  The 2013 Consumer Guide to Financial Self-Defense is intended to help consumers do exactly that when choosing and working with financial professionals.