Have you ever thought about seeking the wise counsel of investment experts to get help investing and advice on how to plan for your long-term financial goals? If so, then you’ve probably wondered how you’d be able to tell whether or not the advice you’re getting is worthwhile.
Here are some things to watch out for so that you can be in a better position to judge the quality of the advice you’re getting.
Where Can You Find Help Investing?
The financial industry can be a confusing place. There are many different types of “experts” out there peddling their wares. One of the most important distinctions to understand is that of a securities broker vs. an investment advisor. Brokers and advisors are compensated differently. Brokers earn a commission from products they sell, so they have incentives to sell you those products that offer them the highest commission payout.
Advisors, on the other hand, earn in one of two ways. Some earn a flat percentage of the total volume of assets they manage (between 1 – 1.5% is a typical fee level). These advisors do better when you do better – i.e. when the value of your portfolio increases, regardless of what products are in it or how often it trades, they do better as well.
Other advisors charge a flat fee for managing your portfolio. They aren’t incentivized by commissions. They simply earn a flat fee: it’s direct and straightforward.
Registered Investment Advisors (RIAs) have a fiduciary obligation, which means they are held to the standard of acting solely in your best interest. Brokers normally are not held to the fiduciary standard.
Do You Need Help Understanding Finance-Speak?
Financial terminology can be unfathomably complex. This can make financial conversations intimidating for those not versed in the nuances of “fixed-floating swaps” or “Gaussian copulas.”
A good rule of thumb is this: the more confusing the explanation, the less likely it is to be good advice. A good financial professional can take any subject – no matter how complex – and break it down into a clear and concise narrative that any attentive non-expert can understand. If you are not clear on something, ask a question. You may be surprised to see how easily a so-called expert can unravel when pressed to explain something clearly and logically.
Does Your Financial Advisor Understand Your Goals?
Different long-term goals require different assets and different allocations. If you are young with a stable income and several decades before your first big liquidity event, you need a larger growth component. As retirement draws nearer, you should see a gradual shift towards more a more income-oriented strategy.
Your investment expert should be leading this discussion and conveying to you a clear understanding of the specific contours of your goals, your risk tolerance, and anything else relevant to your unique situation. Make sure that your investment expert isn’t just parroting the corporate line on whatever their company is trying to sell this week.
Get a Second Opinion
Jemstep, an online registered investment advisor, can give you an unbiased “second opinion” about the quality of your advice. Jemstep will give you specific advice that’s customized to your portfolio, which you can compare to the advice you get from your face-to-face advisor. Jemstep is an RIA, which means it has a fiduciary duty to give you the advice that’s in your best interest.
Good investment advice can provide you peace of mind and give you confidence that your assets are on the right track. If you’re not sure the advice you are getting is up to par, then it may be time to seek other sources of counsel and planning.
Are you getting the advice you need for your financial future? Tell us what you think.
For investment tools and objective, unconflicted advice visit Jemstep.com.