Many investors tend to attribute big losses to market volatility. While you can certainly incur big losses due as a result ofto the ups and downs of the investing, Steve believes the person managing your money has a much bigger impact on your overall wealth.
So how can you make the best decision about who manages your money? Check out today’s Two-Minute Retirement Solution to find out.
TRANSCRIPT
The recent ups and downs in the stock market have everyone focused on volatility. But the greatest risk to your money is not market prices or their movement, but rather who you have managing your money.
Most people spend more time choosing their doctor than the person who is making all the decisions about how their life savings are handled.
And your financial advisor can do as much harm as any not-so-good M.D. But most do no due diligence about the person who literally can make or break their retirement.
The biggest problem is most average investors are overwhelmed by the system and don’t know the pros or cons of a stockbroker, an insurance agent or a registered investment advisor.
If you have $250,000 to $500,000 to be managed, it is a little easier. These are usually the minimum thresholds for fee-based or managed accounts, which I have always believed are the best way to handle your money. The broker charges a flat fee annually and you at least have a handle on what your costs are.
But below these levels, you are pretty much on your own. And costs are all over the spectrum.
But costs are only one of the problems in choosing an advisor.
There’s also the complaint history. How many dings does he or she have on their U4? That’s an SEC record of when or if this person has had any formal complaints from their clients. The U4 is a good place to start when checking out a potential advisor.
But this is far from a complete or accurate history of professional behavior. All brokerage firms will try to settle an issue between a client and an advisor before it reaches the formal reporting stage. So there can be problems in the past, but no official record of any.
Usually there is a settlement or an agreement of some type that makes the problem go away before it hits their U4. Firms are as anxious to get rid of complaints as the reps are.
There are lots of questions you should ask before you make the big decision of who will control the future of your money, but most of us don’t know what they are, otherwise we wouldn’t have as many problems as we do.
What I always recommended to my clients when I was still managing money was to have their lawyer or accountant sit in on our initial meeting to review my proposed ideas so that they could make sure they were comfortable and that my ideas were in their best interests.
It’ll cost you a few bucks to do this, but you can’t put a price on the security of knowing you have someone who isn’t afraid of scrutiny.
Good investing,
Steve
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