There are too many cases of financial fraud these days to report. People that you should be able to trust with your investments sometimes are the crooks. Think Bernie Madoff.
Most financial pros are trustworthy. But due diligence on any financial planner, broker or investment you use is vital. Knowing what's behind the polish of the fancy suit and slick office is vital to protect you and your assets. Do they know what they're talking about? Are they telling the truth? Is their confidence about an investment real?
Using body language to expose key facts and qualities about your financial pro can be the difference between making a great return and losing absolutely everything. But you've got to look for the tiny signs hidden in plain sight. They can seem confident and trustworthy on the surface but when you look more closely you may unmask deception or fear.
A recent report by Team Co Advisers, a hedge fund research company, correlated the success or failure of hedge funds to the behavioral analysis of key leaders at the fund. A similar behavioral analysis of your financial pro will serve you in deciding who to work with and who you should run away from as fast as you can.
Here's what you need to know
When considering any financial pro, the investment strategy is critical. Of course it's got to look good on paper and you've got to be comfortable with the level of risk presented. Behavioral analysis is supplemental and possibly more important info. It will complete the true tale of risk. Here's what to look for:
A false vs genuine smile. Genuine smiles always enroll the eyes. Looks for crows feet. So if your financial pro smiles and says 'This is an investment we're excited about' while you see crows feet, you know it's genuine. If you don't see the crow's feet, beware. Confidence is being overstated. So do more research. He or she may be more interested in their upfront commission than your success.
Similarly, watch for when your pro covers his or her mouth with their hand. It looks natural but can indicate that the next thing they say is false. So if you ask "What's the risk associated with this deal?' and see them cover their mouth as they pause briefly to think and then say 'very little'. This isn't what they believe. They're holding back information. Be sure to dig deeper with your questions to find the truth.
Be careful about covert domination. Do they interrupt you frequently? Are they making themselves big and taking up lots of space with their arms and legs? Are they stone faced when it comes to the topic of a certain investment? Or maybe their speech or eye blink rate noticeably increases. Look for a significant shift in baseline behavior with any of these tells when the conversation turns to risk. Miss the signs and you could be in for a financial experience you didn't plan on. Your account could empty out quickly one day soon.
And most importantly if you just feel something is off, don't get involved with the person or any of their investments. I've given you a few tips on what to look for. They're some science that can justify a feeling you may get. Our survival as a species has been based on our ability to know when to trust others. And you already know when you should trust someone or move on. Don't get so swept away in figures on paper that you forget to pay attention to the internal lie detector you already have.