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Money Girl
080 MG How to Find an Investment Advisor - Part 2
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Let's continue with part two of how to find a good investment advisor. I took this right from chapter nine of my audiobook, The Disciplined Investor, Essential Strategies for Success. Okay, I'm plugging the book, but all kidding aside, I think you'll really enjoy it and you'll learn a lot about investing. We left off with part one that covered advisor basics. The things really that you need to look for. Now we'll explore some tips to find the best advisor to work with. The key word there is with. There should be a team effort as you really need to be involved. Right off the bat, you need to take some time to assess what type of investor you are. Once you have got a good idea, start to think about if you want to even consider using an advisor. Either way, you now have a good base of knowledge and you are now on the road to becoming a disciplined investor. If you feel that you would like to explore the advisor route, here are a few important points you can use as a checklist in the interview process. These are the main areas to focus on, but definitely not the only ones you should ask about. A capable advisor has any number of the following to his or her credit. Certified financial planner or CFP accreditation. Experience. Independent status. Full time status. State insurance license. An excellent and well supported reputation. Not all of these are requirements. For example, if you are only interested in a advisor working with your investments, an insurance license may not be of consequence. On the other hand, a full time status is non negotiable. There is no way that this important profession can be moonlighted. If someone tells you that they can help you in their spare time, run and run fast. Look at the list and you should know that the first position is there for a very good reason. CFPs are excellent choices since at the very least, you know that they are committed and hard working enough to pass the rigorous exhaustive examination process that comes with the territory. Becoming a CFP licensee is not easy. As evidenced by how few of them there are in the country. The process of earning the accreditation tends to weed out the serious committed and career minded advisors from the ones just looking to make a quick book. CFPs are usually able to take a broader and more balanced look at your goals, future and investment needs. They are better equipped to provide you with a wide range of non investment related services as well. The curriculum they study covers the gamut of financial planning matters in sharp contrast to similar certifications that focus more time on insurance sales and marketing. Expert financial advice is a lot like Major League pitching. Experience plays a huge role. A rookie is far less likely to construct a time tested and watertight plan for you than a seasoned veteran. As a rule of thumb, you should seek out an advisor that has at least five years of service under his or her belt. Independent advisors are also better equipped to meet your needs than those that are associated with a big insurance or brokerage firm. This is because advisors who work for one of the big names on Wall Street may be required by their company to sell you many of the products that their company markets. These are usually termed proprietary. For example, if the brokerage firm your advisor works with is worth more investments and the fun she recommends is the worth more stock fund, start asking questions. Is there a financial incentive or bonus for this recommendation of this investment? How does it stack up against its peers? Are the fees competitive? What are the other options and why are they not being presented? What if there is a cheaper financial product offered by a competing firm but you have been pigeonholed into buying the more expensive one from your advisors affiliated company? Who is benefiting from this? Basically, an independent advisor is not hindered by a narrow range of products and services. He or she does not try to pound the square peg into a round hole. At some point in the life of many successful advisors, there comes a time when a great deal of the work can be pawned off to an assistant or rookie partner. The trouble with an advisor who spends more time away from the desk than added is that he may often miss investment opportunities that could have served you quite well. Choose an advisor who spends at least eight to ten hours per day directly serving the needs of their clients rather than wearing the hat of the firm marketer. Unless there is a staff member or a partner that you have agreed to work with in advance, your advisor should be the primary contact for your finances. Of course, for the administrative matters, the advisor may not be needed, so make sure you develop a good relationship with the office administration and staff. Though you may not think so at first, they are a key component to your long-term success. A state insurance license means that your advisor deals with more than just market investments. It means that they can provide a whole host of value-added services to help you meet many of the needs that will help protect your money. Most effective asset allocation plans include some kind of insurance. Can your advisor provide that for you? The final point is the most traditional and the most important. Choosing an advisor, like choosing any product or service, is still essentially a smell test. It is still a good practice to ask a friend or find a professional recommendation. The process still comes with an awful lot of gut feeling. Basically, you could find an advisor who has the world's greatest track record behind them, but if you are not comfortable in their presence, keep looking. So continue to ask your friends about their advisors. Find out what they like or dislike about them. Then interview two or three of the best candidates for the job. Hold yourself back from picking the one with the cheapest services because, as agreed, you will probably get what you pay for. Never underestimate the importance of written materials. If a potential advisor has a book, article or newsletter that you could read something more than a shiny and colorful brochure, at least you know that they are an expert in something. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans or travel. 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Courtesy of Andrew Horowitz, your guest host for Money Girls quick and dirty tips for our richer life. As I promised some important information, in fact two items for you, as you know, I am the guest host and that means that my time filling in for the Money Girl is almost up. I hope that you have enjoyed and learned from the dozen or so shows that I've created. Now is a great time to subscribe to my podcast, The Disciplined Investor, available on iTunes. It's free and you're sure to get a few investment tips along the way. The next episode of the Money Girl will introduce the permanent host that has been working hard to bring you great money tips. Her name is Laura Adams. In next episode, we will both be here to share with you our favorite sites and resources for finance and money. I'll see you then. [MUSIC] H5N1 bird flu is spreading in poultry and cows. It's rare in people, but bird flu can make you sick. 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