There is no hearth of places to turn to for investment advice, but the decision to put your financial future in someone’s hands should be made very carefully after collecting sufficient information.
What are the different types of financial and investment advisers?
- Investment Adviser is a professional firm or an individual that advises clients on investment matters. They may manage trust funds, pension funds and personal investments like stocks and mutual funds on their customer’s behalf.
- Financial planners offer investment advice and help clients with savings, taxes, insurance, estate planning and retirement.
- Brokers buy or sell stocks, mutual funds, bonds on their customer’s behalf.
How do I pick a good investment adviser?
Ask your friends and family if they know a good investment adviser. Also compare price quotes from multiple qualified investment advisers listed on B2B marketplaces and ask them for an appointment.
Interview your financial adviser extensively, judging their professionalism and experience. Let him or her learn about your tax situation, fiscal health and long term goals.
Learn how your adviser gains from you
Investment advisers are paid either a percent of the asset value they handle for a customer, a fixed or hourly fee, or a combination of all. They have a fiduciary responsibility to act in your best interest while making investment decisions on your behalf.
It is best to at least partially compensate the investment adviser based on his or her performance. In such an arrangement, the investment adviser makes a commission only if he or she meets your investment goals. Be wary of investments that pay a large upfront fee to the investment adviser or lock you into investments that levy a withdrawal penalty.
Check credentials and references
It is important to check references and credentials. For example in the US ask for ‘Form ADV’ for the advisers, which provides you with the advisers background, services offered, mode of payment and strategies used.
Form is obtainable from the advisers, the SEC, state security regulator or those advisers managing $25 million or more in client assets. Also inquire about the adviser’s educational and professional background.
Know how to evaluate your advisers
Once you have hired an investment adviser, remember to evaluate his or her performance at regular intervals. It is also important to meet with them regularly to review short and long term goals and to adjust your investment portfolio. Apply the following standards for evaluation.
- Review performance:
Check regularly how your money is doing in the investments advocated by your adviser. Evaluate portfolio performance with regard to investment goal and risk tolerance for invested assets.
Use a proper benchmark or metric matching your investment strategy for various assets. For example if you have invested in stocks, use the market index as the benchmark for comparison.
- Cost-benefit ratio:
Though your money maybe doing well, it’s important to ascertain the ratio of investment return delivered by your adviser to his or her earnings. Are you paying more than you thought for the investment return?
- Quality of investment recommendations:
Evaluate and test your adviser’s knowledge of the latest investment approaches, preparedness to stay above the rest in the changing market and insights or suggestions on new investment strategies.
- Working relationship:
Your investment adviser should regularly communicate and update you about your investments.
- Personalized service:
Adviser should regularly review your investment goals and preferences and tailor the investments accordingly. You should be wary of investment advisers who show too much reliance on software programs to create your portfolio.
Hiring a good investment adviser is important to secure your financial future. Hire someone you can trust and can easily communicate with. If your adviser does not perform as expected, set up a meeting to rectify the situation, else find someone who could be more helpful.
- John Roberts
- Publisher: Independently published
- Paperback: 71 pages
- Paul J. Mladjenovic
- For Dummies
- Kindle Edition
- Used Book in Good Condition
- Susie Vaccaro Hardeman
- Publisher: Ten Speed Press
Last update on 2020-03-19 / Affiliate links / Images from Amazon Product Advertising API