There’s nothing wrong with being efficient. But when you are being efficiently deceived by the mutual fund industry, then watch your wallet. I can prove to you in the next few hundred words how this deception is happening.
Are financial advisors doing any real research for their fees? Or is there simply the appearance of research? As you will find out, the research that is being done is nothing close to what you’d think you are paying for, and this is greatly hurting your future.
In other words, advisors are trained to make it look like they’re doing real research, but they’re not. It’s not the goal, it’s not what they’re paid for, and this hurts your returns – unless you understand this and know how to deal with this.
As a financial advisor you are responsible for providing your customer with valuable information and advice on how to invest and utilize their money. This is not a job for the feint hearted and you need to know your industry in-depth to be able to make recommendations based on current trends.
As you can imagine, customers are very wary about the advisor they use. This is understandable because they don’t want to take unnecessary risks with their finances, especially when expecting to increase their funds for their retirement one day.
It is imperative that you take your marketing very carefully, ensuring that you reach your audience effectively and prove that you are a top choice to help them with their investment options.
In today’s society, finding an investment advisor that will fulfill your needs can be difficult. In order to find the advisor who is right for you, you must first evaluate your financial goals and think about your reasons for investing. Speaking with a professional and doing research on your own can both be helpful in clarifying your goals, but most people fall into broad categories of either short-term or long-term planners able to afford either high-risk or low-risk options. When saving for your newborn’s college tuition, it’s often recommended that you make choices that are relatively secure, even if they yield lower returns than some stocks. That way, you avoid the chance of the account losing money right before it’s time for Junior to leave the nest. If you are using discretionary income and hoping to increase the sum of funds available for a bigger investment, it’s important to make sure the goal is achievable in the amount of time available. From the business perspective, these responsible goals are referred to as S (Smart) M (Measurable) A (Attainable) R (Realistic) T (Timely) goals, or S.M.A.R.T goals.
Your Financial Goals
First of all, what are your financial goals? Experts suggest writing down your ideal timetable of goals in order to maintain a clear focus. In other words, are you able to set aside this fund for a long period of time? Decades, even? In addition, figure out what you want or expect from your investments. Most people would love to have their savings multiplied, but not everyone can afford to risk losing part or all of that sum. Once you have determined your goals, you should conduct your own research about the experiences of others with certain advisement professionals or firms.
In light of recent Wall Street scandals, many investors are taking a closer look at who is actually managing their money and what investment methodology they are following. Investors are taking the time to do their due-diligence and are becoming more educated on selecting the best financial advisor. In my travels and meetings with clients, I continue to hear the same vein of questions. How do I select the best wealth manager? How do I select the best investment management company? Are there FAQ’s on selecting the best financial advisor that I can read? Are “Registered Representatives” fiduciaries? What is a Registered Investment Advisor? What is the difference between a Registered Representative and a Registered Investment Advisor? With such great questions, I wanted to take the time to answer these questions and address this fundamental topic of helping investors select the best financial advisor or wealth manager.
Question #1. How do I know if my Financial Advisor has a Fiduciary Responsibility?
Only a small percentage of financial advisors are Registered Investment Advisors (RIA). Federal and state law requires that RIAs are held to a fiduciary standard. Most so called “financial advisors” are considered broker-dealers and are held to a lower standard of diligence on behalf of their clients. One of the best ways to judge if your financial advisor is held to a Fiduciary standard is to find out how he or she is compensated.
With all the publicity in the newspapers, television, internet, and magazines, we are all familiar with the likes of Bernie Madoff and R. Allen Stanford. These two “financial advisors” are accused of bilking their clients out of $60 Billion and $10 Billion respectively.
What in the world is going on? Who can you Trust? How do you protect yourself? How do you find a financial advisor that you can trust?
How should you begin to protect yourself?
Are you in debt? How are your investments fairing? Are you aware of what’s happening to your money? Does asking these sorts of questions cause you stress?
Now, a different type of question: wouldn’t it be nice to be in control of your financial future? Well you can be! Taking charge of your financial destiny is not something that only a few financially literate elite manage to achieve. It’s open to everyone. And with a little bit of planning, education and discipline, sound financial management is available to you too!
Choose your financial advisor with care
Retirement often presents us with bewildering choices: When to retire? Where to live? How to occupy one’s time? These kinds of decisions are mostly matters of personal choice, and though you can seek the advice of friends and family, ultimately you’ll need to decide them on your own. However, the financial aspects of retirement – how you will derive income from your assets now that you’re no longer drawing a steady paycheck – comprise one broad area where you should consider seeking professional advice, particularly if your financial situation is complex.
Personal financial advisors are more prevalent than ever, and eager to apply their expertise to your situation. An advisor will sit down with you and look at your complete financial picture: any income you have from investments or pensions, your overall assets, your property, any debts or financial obligations you may still have. A good advisor may further help you make decisions regarding insurance and estate planning, and of course will weigh all the tax consequences. In this way, your advisor will help you formulate an overall plan for income in retirement, for adequate insurance, and for passing on your estate as beneficially as possible.
What should you look for in a financial advisor? First of all, credentials. The field is broad and all-encompassing, and people from many professional backgrounds can hang out a shingle advertising financial advice. One of the most respected credentials to look for is “CFP” (Certified Financial Planner). Earning this credential requires working through half a dozen rigorous courses, passing several exams (including ethics training), and having three years of job experience. Other designations included CPA (Certified Public Accountant), CPA/PFS (a CPA with training in financial planning), ChFC (Chartered Financial Consultant, with expertise in insurance matters), and CRPC (Chartered Retirement Planning Counselor). But a CFP will generally have the broadest training.