Financial advisors could be far clearer with potential investors about the fact that hypothetical performance doesn’t indicate past history or future results, according to Forbes contributor Ivan Illan.

“Complex regulations” from the Securities and Exchange Commission and the Financial Industry Regulatory Authority mean that “most FAs do not even have a particular portfolio performance history that they are able to formally share with the public,” Illan, founder and chief executive officer of registered investment advisor firm Aligne Wealth Advisors Investment Management, wrote in Forbes.

Hence, advisors rely on hypothetical performance in their client proposals, according to Illan.

But “a great FA” would be upfront about such performance history not being indicative of actual results, he writes.

Meanwhile, advisors working with independent registered investment advisory firms can in fact show prospective clients their firm’s actual performance history, according to Illan.

Moreover, these types of communications and the disclosures that must accompany them are clearly governed by SEC rules, he writes.

“There are great financial advisors/investment managers in the marketplace who go through painstaking detail to ensure their clients understand what service they are providing or not providing and how much money they’re being paid for the privilege,” Illan wrote in conclusion. “Too often, retail investors believe their money manager is doing something that they may not, which is a huge opportunity for improvement.”

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