Choose objective and competent financial advisers and investment counselors – Step 10 of 10 Financial Planning Steps in the Right Direction
CLICK HERE TO READ THE SKILLED INVESTOR’s OTHER ARTICLES ABOUT THESE “10 FINANCIAL PLANNING STEPS IN THE RIGHT DIRECTION
Pick financial and investment advisers solely to obtain objective and high quality advice. Specific financial and investment advice is potentially of high quality, if it is carefully customized to your particular needs and is given by an adviser who is independent, knowledgeable, and competent. If you agree with the advice being given, then buy the recommended securities and other financial product through the most inexpensive channel possible.
The only reliable way to ensure the objectivity of a financial planning advisor or investment counselor is to pay directly for the adviser’s services, after investigating the adviser’s background, competence, and work ethic.
There are no shortcuts. Free advice is never free. In fact, it is usually much more expensive than the advice you receive from an advisor whom you pay directly.
Advice that is contingent on a requirement to purchase products from your planning adviser is subject to a conflict of interest. Financial advisers, who are not paid directly by you, instead derive compensation from commissions and other fees paid by the financial services industry. Through these commissions and other hidden costs and/or through suboptimal investment performance, you are likely to pay a significantly higher price for “free” investment advice.
When a financial advisor or investment counselor has a conflict of interest, you can never be certain whether you are getting the best advice possible.
Very many industry-paid advisers are ethical and helpful. However, the reputations of ethical advisers are tainted by others who are just salespeople that masquerade as advisers.
You should never have to waste your time and emotion second-guessing your advisor’s motivations. Often, self-interested advisors are well trained, and their sales presentations are sophisticated and polished. It may be a challenge to tell whether the advice given is in your best interests or whether it serves the financial interests of your adviser and the company he represents.
If you become more knowledgeable about how the advisory industry works, you can better assess the quality of advice you receive. These articles will help you, and they will lead you to additional information about advisors:
Personal Financial Planning
- Allocate investments across the primary asset classes – Step 5 of 10 Financial Planning Steps in the Right Direction (CLICK HERE TO READ THE SKILLED INVESTOR's OTHER ARTICLES ABOUT THESE "10 FINANCIAL PLANNING STEPS IN THE RIGHT DIRECTION
Appropriately setting your personal investment asset allocation in line with your personal investment risk tolerance is a critical decision for every individual investor.
Because the average risk-averse investor holds the average portfolio asset allocation, this becomes the starting [...])
- The Cost of Investment Counselors When You Pay Investment Sales Loads (How expensive is financial advisor compensation paid via sales loads?
A sales load might be the method that you prefer to compensate your broker or advisor. If your advisor is truly competent and ethical, he may be able to manage properly the inherent conflicts of interest that are associated with commissioned investment product sales. Even if [...])
- Stay Invested in Securities Markets to Earn Risk Premiums (You must stay invested in the securities markets to earn market return risk premiums
Securities markets pay risk premiums to risk takers
You have to have your money invested and at risk to be paid a risk premium. Attempting to avoid risk or losses by jumping in and out to "time the markets" does not work. Scientific [...])
- How many stocks are needed for a well-diversified portfolio? (Industry rules-of-thumb often state that 15 to 30 stocks are enough for a well-diversified portfolio. This can be very misleading.
Recent studies point out that industry rules-of-thumb on the number of stocks needed for a well-diversified portfolio are simply not adequate. These rules-of-thumb most often state that 15 to 30 stocks are enough. “The Truth About [...])
- The Biggest Personal Finance Story of the Past 30 Years (
The Biggest Personal Finance Story of the Past 30 Years - Part 1
What could the biggest personal finance story of three decades be?
The growth of mutual funds and ETFs? Nope.
The dot com boom and bust? Nope.
Vanishing pensions? Nope.
The not-so-high quality of mortgage bonds? Nope.
A 0% personal savings rate nationally? [...])
- Factors Favoring Roth IRA and Roth 401k Plan Contributions (Factors that tend to favor Roth IRA and Roth 401k tax-advantaged plan contributions
In a recent article, "Traditional versus Roth tax-advantaged plan contributions," The Skilled Investor discussed why the average taxpayer would tend to benefit more by contributing to traditional rather than to tax-advantaged Roth IRA and Roth 401(k) retirement plans. This follow-up article in two-parts [...])
- Vantagepoint 500 Stock Index mutual fund Class II Shares (VPSKX) rate a +9 Fund Authority Score (Here is some really good news for you. The Skilled Investor has published an article about lower cost S&P 500 index mutual funds that you can read, entitled: Low Cost S&P 500 Index Mutual Funds. The Standard & Poors 500 stock index is the most common equity index fund benchmark in the U.S. The S [...])
- The Kind of Financial Advisor You Need (
The kind of financial advisor you need - A Tip from The Skilled Investor
Good or bad, financial advisors are expensive. If you need a financial advisor's help and you carefully select a good financial advisor, the value of the personal finance and investment advice that you receive might easily repay the advisor cost. However, bad [...])
- Avoid Mutual Fund and ETF Sales Commissions and Fees (Avoid mutual funds and ETFs with sales commissions and marketing fees
Summary: There is no convincing evidence that sales loads and other sales fees charged to investors result in higher mutual fund and ETF performance.
In fact, the opposite has repeatedly been proven true with mutual funds, which have a long performance history to evaluate. Paying a [...])
- My Treasure Is Taken by My Credit Card Company (
PIRATES OF THE CREDIT SEA - Part 1: My Treasure Is Taken!
Regular readers of The Skilled Investor have already been warned previously of the general dangers of consumer debt and of the risks associated with credit cards. Now, The Skilled Investor has himself become ensnared. In a series of articles, I will: A) summarize my [...])
- American Funds – Income Fund of America – Class A Shares (AMECX) rate a +2 Fund Authority Score (Fund Authority Scores rate mutual funds and exchange traded funds (ETFs) on the most important economic factors that influence individual investors' net long term diversified investment fund performance. The Skilled Investor developed the Fund Authority Score system to provide individual investors with concise and objective summaries of mutual funds and ETFs for comparisons within investment [...])
- Build Investment Asset Buffers to Protect Yourself from Market Volatility (
Build Investment Asset Buffers to Protect Yourself from Market Volatility
You may be just as nervous as the next person is about investment risk. However, the coverage of your future expenses by your accumulated assets will determine whether you can actually manage, when risk really happens.
A previous article, "The Solution - ONLY follow financial strategies that [...])
- Insure against risks economically – Step 8 of 10 Financial Planning Steps in the Right Direction (CLICK HERE TO READ THE SKILLED INVESTOR's OTHER ARTICLES ABOUT THESE "10 FINANCIAL PLANNING STEPS IN THE RIGHT DIRECTION
While value, affordability, risk exposure, and risk tolerance should affect insurance purchase decisions, insurance is often sold and purchased emotionally. Yet, insurance premium payments reduce personal funds that might otherwise be available for additional investments. Many people [...])
- 22 Ways to Avoid Financial Advisor and Investment Counselor Frauds and Scams (Avoiding financial advisor and investment counselor frauds and scams - Overview
The best way to avoid being defrauded or scammed by a financial or investment advisor is to investigate carefully several different advisers before hiring one of them.
If you carefully choose a financial adviser or investment counselor, you have a far greater chance of finding one [...])
- Insurable Risks Could Destroy Your Best Laid Financial Plans (
Do not ignore insurable risks that could destroy your best laid financial plans
A previous financial article, “The Solution - ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that investors are much better off with a well-considered financial plan. A stable set of financial beliefs [...])
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