If personal finance is difficult for you, carefully hire a good financial and investment adviser
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 can help you to keep focused and on track throughout your life. This follow-up article discusses how important it is for people to be careful when they select a financial advisor.
If you realize that you need help with your personal financial planning, get a good financial advisor.
However, be very, very careful with your financial advisor selection process. A good financial advisor could make things much better. A poor one could make things much worse. (See: Financial advisor costs and the value of their investment strategies determine your return on investment from these investment advisor services)
Competent, self-directed investors may have less need for a financial advisor, when they adhere to financial planning strategies and investment funds purchasing practices that are similar to those summarized in The Skilled Investor’s “Financial Decision Rules” articles category. By already following more optimal investment returns strategies, they may find it more difficult to justify the cost of a financial planning and investment advisor.
In contrast, individual investors may repeatedly cost themselves substantial sums by making behavioral errors, and these investors could benefit from the assistance of a good financial advisor. For them, the cost of an advisor may be easier to justify, because of their personal finance inefficiencies. Investors with investment behavior problems might pay the advisor’s costs and still come out substantially ahead relative to having done more poorly on their own. (See: Value-added and value-diminishing investor activities and What is the cost to individual investors of sub-optimal portfolio diversification?)
If behavioral control is difficult or implementation is confusing for you, then you should carefully select and hire a good advisor. You will still be the ultimate decision maker, but you can empower your financial advisor to try to keep you in bounds, while you listen seriously to his or her advice. However, if you do decide to hire a financial planning advisor and/or investment advisor, do not take this advisor selection process lightly. The financial advisor you choose could help you to make or break you lifetime financial plan. The Skilled Investor has written expensively on financial advisors to suggest ways that individuals can improve their advisor selection process. (See these articles on Selecting an Advisor and these articles on Regulation of Advisors)
Selecting a financial advisor just because your relative, friend, or neighbor trusts the financial advisor they are using could be a disastrous way to choose an advisor. How do you know that this person did their homework when they selected the advisor that they trust? Many of the advisory scandals reported in the media show that one person trusted the recommendation of another person and on and on. Unfortunately, nobody along this chain of referrals did their homework to check the advisor’s background, competence, and ethics. In the end, they all get taken for a ride on the dead end train of financial greed.
Unfortunately, many people have thrown up their hands at the seeming complexity of doing personal financial planning and investing. They use slipshod methods to quickly pick a financial advisor and hope that this advisor will do what is right for them. Unfortunately, advisor selection is a minefield and lack of knowledge among financial advisors and financial conflicts of interest are major culprits. (See these articles on Payment of Advisors and these articles on Advisor Fraud)
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portfolio diversification
Personal Financial Planning
- Avoid Very Large Actively Managed Mutual Funds (
Avoid very large actively managed mutual funds
Big actively managed mutual fund portfolio positions and higher percentage ownership of any company’s bonds or common stock are not good things for actively managed mutual funds. Nor, are these big positions and high percentages good for you.
Large portfolio size constrains how efficiently an actively managed mutual fund can [...])
- September 20 2007 Edition of the Carnival of Financial Planning (
Carnival of Financial Planning — September 20, 2007 Edition
Welcome to the September 20, 2007 edition of the Carnival of Financial Planning.
The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security. This [...])
- Traditional IRA and 401k Versus Roth IRA and Roth 401k Contributions (
Traditional IRA and 401k versus Roth IRA and Roth 401(k) plan contributions
Many taxpayers puzzle over whether to contribute to traditional versus Roth tax-advantaged retirement plans. For most people, contributions to traditional tax-advantaged plans will probably provide a higher net present value over their lifetimes.
Given our tax-related software modeling capabilities, The Skilled Investor has some observations [...])
- Personal Investment Articles this Week (
Best Personal Financial Planning and Personal Investment Articles this Week from Personal Finance Blogs
Carnival of Financial Planning - Edition #188 - June 10, 2011
Welcome to the June 10, 2011 Edition #188 of the Carnival of Financial Planning.
The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus [...])
- Set a Minimum Portfolio Size Threshold for Mutual Funds and ETFs (
Choose mutual funds and ETFs with a minimum economical portfolio size
If you are going to invest in actively managed funds, then you should want them to have a sufficiently large asset base to fund the necessary research.
If an active fund is too small, then fund management quality can suffer or fees could grow. Index funds [...])
- The New Blog Carnival of Financial Planning (
Introducing the Carnival of Financial Planning
We spend an extraordinary amount of time earning money and a lot of personal time on backward looking tax and accounting matters. When these tasks are done, how much time and energy do you have left for forward-looking financial planning activities that could improve your future financial welfare? Most people [...])
- Develop Your Own Personal Financial Planning Skills – Step 1 of 10 Financial Planning Steps in the Right Direction (You are completely responsible for your financial and investment success or failure. Delegating investment decisions to industry advisers largely on naive faith and hope without adequate personal knowledge, attention, and control can be very risky to your personal and family welfare. The only practical solution is for you to increase your personal investment knowledge and [...])
- Hitting the Citibank Stone Wall in Polite Conversation (
PIRATES OF THE CREDIT SEA - Part 4: Hitting the Citibank Stone Wall in Polite Conversation
This article continues my personal saga of trying to get Citibank to fix problems with their management of my credit card account with them.
For a summary of the overall situation, go to Part #1: My Treasure Is Taken!
For an article [...])
- 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 [...])
- Advisor Costs and Strategies Determine Your Return on their Services (
Financial advisor costs and the value of their investment strategies determine your return on investment from these investment advisor services
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 [...])
- May 17 2007 Edition of the Carnival of Financial Planning (
Carnival of Financial Planning - May 17, 2007 Edition
Welcome to the May 17, 2007 edition of the Carnival of Financial Planning.
The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security. This [...])
- Diversify To Avoid Investment Fraud (
Another kind of investment diversification that individual investors should consider important relates to the failure or corruption of the financial industry intermediaries and fiduciaries that hold individual investors’ securities.
This meaning of diversification has nothing to do with scientific investment principles related to optimal portfolio diversification. However, it is still very important. Prudent investment practices would [...])
