Chifley,
I have relevant experience in the arena of financial planning (3 years
as a financial advisor and now I market asset management to defined
benefit plan sponsors), so I think I can provide some dependable
advice. I do not know of many specific firms that attempt to focus on
the development of intellectual capital, as most firms design
educational materials to lead a client to its own representatives
(sorry--I?m a bit of a cynic). In other words, if they are trying to
sell you variable annuities, they will give you a laundry list of all
the wonderful things associated with variable products, without
highlighting the high expenses and other issues associated with those
products. Likewise, many advisors are compensated through loads on
mutual funds, and you are not likely to receive a full accounting of
the differences between load and no load funds. With that said, I do
believe that paying a load can be a positive, if you are getting
adequate advice from a planner and the fund has a proven track record
and reasonable fees. In my experience, the best advisor is one who
will try to educate his or her clients, and fully examine all the
relevant details. Sometimes this entails telling a client that they
are doing some things correctly and leaving their money as is. Many
times this is not the case, but it does occur. If an advisor tells
you that you need to sell every single investment you have and turn
the money over to him, I would be very cautious. I would also be
cautious of firms that branch out into money management. In my mind,
when an insurance company, tax company, or accounting firm starts to
sell mutual funds, it is a huge red flag. Typically, the best option
is self-education, followed be a very focused search. If you decide
to do it yourself, you really need to stay on top of legislative and
tax changes. If you do your homework you can avoid costly mistakes
and juggling your money from advisor to advisor. I would ask an
advisor some of the following questions:
-How are you compensated?
-What are your credentials (work history, education?many successful
advisors have extensive background in sales and not much training in
finance, CFP (Charted Financial Planner) designation)?
-How big is your client base (in both dollars and numbers of clients)?
-How often do you meet with your clients?
-How diverse are your product lines (with particular focus on how many
fund families are available on his platform to sell you)? Note: this
is important because one fund family will not have the best manager of
small cap, large cap, international, fixed income, and the like.
Typically, a company will have a few products that are performing
well, but don?t get into all funds with the same family of mutual
funds.
-Don?t hesitate to ask tough questions after doing your homework. If
an advisor is going to get paid to manage your money, they need to be
prepared to give you personal attention.
(this list is by no means comprehensive, but the book highlighted
below will give you more ideas)
On the personal education side of it, I think that the most
comprehensive and accurate book on personal finance is a book by Ric
Edelman; The Truth About Money (in it?s 3rd edition currently). Here
is a link to the book on amazon:
http://www.amazon.com/exec/obidos/tg/detail/-/0060566582/qid=1099345015/sr=1-2/ref=sr_1_2/102-8361924-5374544?v=glance&s=books
He also has a website @ http://www.ricedelman.com/
I also highly recommend reading Warren Buffett?s annual letters from
Berkshire Hathaway?s annual report. They are located at:
http://www.berkshirehathaway.com/annual.html
Another great resource for investment education is www.investopedia.com
I also recommend looking up a broker on the NASD brokercheck website:
http://www.nasd.com/stellent/idcplg?IdcService=SS_GET_PAGE&ssDocName=NASDW_005882&ssSourceNodeId=758
With all this said, I don?t think that Ric, or even Warren, for that
matter, are correct 100% of the time (and I am much further away from
infallibility than they :o) ). I would keep a focus on the long term
and only put money into equity markets that you do not need as an
emergency reserve. If you have a 10-year investment horizon and you
can extract emotion from investing, you can do very well for yourself.
If you invest on the basis of emotion, you will end up buying your
investments when they are at their peak and selling your investments
when they are at their low point. It is very tough to do the right
thing with your investments. At any rate, I hope this was of some
help to you. Good luck.
MP |
