Tuesday, August 5, 2008

A place for professionals

Managing your money well does not require a professional.  You can manage your money without help from a financial advisor or planner.

However, there is a time and place for professionals.  If you are not interested in spending the time to learn the basics of financial planning or if you don't have the disciple to stick to your plan when your investments are losing money, a financial professional might be able to help you.

If you are going to hire someone to help you with your money it is vital that you take the time to make sure that you find the right person.  Because your situation is unique you will need to decide what factors are most important to you in choosing an advisor.  Here are a few things to consider when looking for a financial advisor:
  • Talk to your friends and colleagues - especially those whose attitude toward money you respect.  Ask them for recommendations.
  • Brokerages and financial advice firms give their advisors a great deal of freedom.  There can be great variations in quality of advice and investing style within the same firm.  Therefore, it is often more useful to look for an individual that you want to work with, not a firm.
  • Understand how your advisor gets paid.  Most will be paid on either fees, commissions, or a combination of both.  All of these forms of compensation are legitimate.  It should be absolutely clear to you exactly how your advisor is making their money.  That money is coming from you, after all.  Commissions-based planners have been beaten up in the press in recent years.  However, they can make sense to newer investors with relatively straightforward needs and small amounts to invest.  If you have a larger amount of money and more complicated needs, a fee based planner might be more appropriate.  Only you can decide.
  • Find someone who you trust and who supports your values.  One couple I know went over their budget with a financial planner on their initial meeting.  Their budget included giving away 10% of their money to their church.  The planner noticed that they spent a lot of money on "tithe" (pronouncing it incorrectly as "tith") and asked if they might be able to cut back some spending there.  Probably not the right advisor for them.
  • Don't be afraid of someone who is new to the industry and hungry for business.  If they have few clients they can devote more time to you.
That should be enough to get you on your way.  For more detailed info, read what The Mole has to say on choosing an advisor.


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RDS said...


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