Do you think you need an Investment Advisor? Hold on before
you answer because this is sort of a trick question. Also,
I am definitely biased because I am an Investment Advisor.
Nonetheless, I think I can assist you in looking at this
issue in a way that will serve you.
Working with a fair number of investors over the last nearly 20
years, I have observed that while most are intelligent people,
and many are fairly knowledgeable about the market, they are, as
a group, not terribly successful with their investing.
Why should they be? More likely than not they have made their
living doing something other than investing, so why would they
think they can do what a professional does better than a
professional? (After all, they go to professionals for health
care or for car repairs when needed!)
Most investors-even some professionals-tend to be "off" in their
timing: they buy things when they are hot, not when they are
cold. But for the greatest benefit, it should be the opposite.
The media doesn't help much when it comes to this buying
approach, and let's face it; greed and fear play a large part in
most peoples' investment decisions.
I truly believe the majority of people would be better of (that
is, they would end up with more money at the end of the day) if
they used professional money managers to advise them on their
investing. Specifically I am referring to Registered Investment
Advisors with proven track records of performance in investing in
stocks, bonds, mutual funds
Let me burst one myth right off the bat: You don't have to be a
millionaire to engage the services of a topnotch advisor. Some
people think you need to start an account with $50,000 or more
to get a really good advisor. Well, you may have more choices
if you're at that level, however you can find very successful
Investment Advisors who will accept opening accounts for as
little as $5000.
There are literally thousands of Registered Investment Advisors
in the US. Just what do they do-what service do they provide you?
They do the legwork; the research and analysis. Maybe more
importantly, they keep their primary focus on the markets, and
specifically on their specialty area like individual stocks,
mutual funds, or bonds.
Because they spend the bulk of their time and energy researching,
considering, and analyzing, they naturally have a greater sense
of the market and its movements than those of us who don't put
this kind of attention into it. So, with the right advisor, you
can keep your focus on what you want-like your business or your
retirement or whatever-and still get the information you want and
need to invest wisely.
How Do You Find The Advisor for You?
Since there are good Investment Advisors and bad ones, how do you
find the former and avoid the latter? Good question, and there
are some keys. Most large brokerage firms list the Investment
Advisors they work with and maintain information about their past
performance. This is not a foolproof resource, though, since they
tend to recommend the Investment Advisors who invest in their
products or clear their business with the firm. So if you pursue
this avenue, you need to watch for conflict of interest issues.
You can always subscribe to one of the numerous database services
that include information, and sometimes rankings, on Investment
Advisors. These services tend to be fairly pricey, though, so
they may not be your best choice. Another option is to find
articles (yes, like this one) or free newsletters written by
Investment Advisors. If you find one or several that make sense
to you, check out the IA and see if there's chemistry between
you.
When checking out advisors, here are some things to keep in mind:
1. Verify their record -- look over their past performance;
2. Consider their system. Will it work in different market
environments?;
3. As best you can, check out their operation and
4. See if they've had regulatory problems.
5. Equally important as doing your due diligence is making sure
there is good communication between you and your advisor and
that you trust this person with your money choices.
Another quick free way to scan through a select database and find
a wide variety of candidates is with www.wiseradvisor.com. I'm
registered there myself as an advisor and know that the company
did a background check regarding registrations and regulatory
issues.
An important question to ask is the how the advisor gets
compensated. You want to stay away from commission junkies or
salesmen disguised as advisors. I believe that you will get the
best unbiased advice from someone who is paid a management fee
based on the value of the assets that you entrust them with.
To take it one step further, ask if the advisor invests his own
money in the same methodology that he recommends for his clients.
If he doesn't, ask why. If you don't like the answer, close your
check book and run as fast as you can.
Choosing an Investment Advisor can yield long-term high profit
benefits. I encourage you to consider it if you haven't before.
However, as with any relationship, make sure there's a fit before
you jump into it.
© Ulli G. Niemann
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