“A stockbroker is somebody who invests all your money until it’s gone.” — Woody Allen
So I was having lunch at the Bozeman Trail Steakhouse the other day and was introduced to a local who had been to see one of these financial advisors for investment advice. I asked what the advisor said. The local replied, “Said I was a six on a scale of one to 10.” I asked what that meant and got hemming and hawing and the conclusion was that neither the local nor the advisor knew.
Herein lies the problem in dealing with partially trained product salespersons: they ask a few simple questions like, “Would you be more comfortable owning stocks when the market was in a freefall, or holding cash when the market was roaring up?” What a stupid question.
Investment questionnaires are intended to let the salesperson limit their risk of losing your money rather than in actually making you money. This is not personalized investment advice.
Often the end result is to offer to put you in some mutual fund or series of funds, or maybe ETFs — for a fee, of course.
So, where are the “free” helpers? You may as well ask me the air-speed velocity of an unladen swallow. (African or European?)
There are Web sites that claim to be objective, though, so let’s look at a couple.
1. “Talk to Chuck”: Charles Schwab charges fund families huge fees to be included in their “objective” fund base. In addition, they used to charge financial advisors fees to be included as a “recommended” advisor. Their Web site leads you to buy their stuff (naturally), but it is by no means objective.
2. Fidelity: The “other” supermarket tries to sell you something (naturally), and most of the portals lead you to a fund choice. You can:
- a. Do it yourself (buyer beware);
- b. Get complimentary advice only when you need it. Ask, “How old is this helper and what training did they have?” Besides, when you think you need it, it’s probably too late;
- c. Pay a “nominal” fee for professional ongoing advice. Ask the same questions as the first two, plus “How much?”
3. Morningstar: Once in the business of only rating mutual funds, they have moved into the investment management business for the same reasons everybody else has — there are big bucks in it. They still have their star funds but also offer analysis of your portfolio and feature “free” membership for a while. I didn’t have the patience to see what and when you have to pay for something.
4. Vanguard: The low-cost brainchild of a great gentleman, John Bogle. They have good information for investors, including modules on:
- a. Planning and education
- b. Controlling costs
- c. Retirement
- d. General investment planning
- e. College planning
- f. Investment basics
- g. Tax central
Vanguard funds are lower in costs than just about anybody else and their business focuses on index funds and ETFs. Look at their Admiralty Treasury Funds for some good income options.
5. Financeware: A non-brokerage related site developed by colleague David Loeper, using technology we developed to match expected returns with objectives. There is some good stuff here.
6. http://crr.bc.edu: Boston College’s Center for Retirement Research Web site is loaded with academic studies and statistics on retirement savings and lifestyle. Go there to get the big picture.
7. www.moneysmarts.com: AARP Financial’s user-friendly site features the Jargonator to cut through dense financial lingo. Don’t know the difference between a Roth IRA and a rollover IRA? Moneysmarts has some answers.
8. www.360financialliteracy. org: Sponsored by the American Institute for Certified Public Accountants, 360 Degrees of Financial Literacy offers detailed financial advice of all kinds, including retirement investing.
9. MoneyCulture at howlingwolf.org: Its ours, so I’m biased. No comment
10. https://somebodyelsesmoney.com/: For retirement plans, participants and advisors. See my comment in #9.
But, what if you want an actual human being to help you navigate the Road to Retirement? In a recent Wall Street Journal article, it was reported that 78 percent of investors want unbiased advice in which the advisor and the firm are fee neutral.
The level of expertise and independence of the advisor are the primary considerations in retaining advisors. Investors want information about asset allocation, taxes and estate planning along with unconflicted investment recommendations.
Today’s investors need someone who sits on the same side of the table as they and doesn’t try to push products down their throat. Your helper should assist you in defining realistic goals and establishing an asset allocation strategy, evaluate investment options objectively, and guide you to the lowest cost vehicles with equivalent performance. Their concern should be for your welfare, not their revenues.
So, how do you pick an investment helper from among the 650,000 financial advisors?
Below are some questions that you should ask prior to hiring a helper:
- 1. Is the person educated by a recognized body such as a college or one of the few good certifying organizations?
- 2. Is the helper’s advice indepen- dent and conflict-free?
- 3. What are their training back- ground, qualifications and experi- ence? And how thoroughly does the helper understand the markets, investment options and strategies?
- 4. How frequently will they communicate with you?
- 5. Are there any biases in their recommendations or the information they provide?
- 6. Have they made full and complete disclosure of how and what they get paid, including any direct and indirect compensation received by them and their firm from you and any investment products they offer? And are these fees reasonable and level across product lines?
- 7. Do they adhere to the highest ethical standards? You can check with state and national agencies to see if a helper has had any complaints or actions. If you want to know how to check, call me.
- 8. Do you implicitly trust them?
One thing to consider is to not get caught up in the performance game. Understand how and how much your helper gets paid. After all, what is really important is what you keep, not what you make. It’s your money.