How to choose a great financial adviser
Reprinted courtesy of MarketWatch.com
Published: Nov. 27, 2012
To read the original article click here
Financial advice isn’t free. If you have a financial adviser, one way or another you will pay. However, if you use your adviser wisely, you can get far more than your money’s worth.
I believe every serious investor should work with a professional adviser for at least one year. That’s enough time to tackle most of the big financial decisions you’ll ever have to make, although you will probably need to revisit some issues from time to time as your life and your circumstances evolve.
If you are not currently working with an adviser, you may be thinking: “Why should I pay for somebody to help me do what I’m already doing just fine on my own?” That is a valid question.
In my latest book, “Get Smart or Get Screwed: How to Select the Best and Get the Most from Your Financial Advisor,” I mentioned more than 40 valuable services that a good adviser can provide. For example:
A great adviser will help you focus on defense as well as offense, making sure you understand and can deal with the amount of risk that’s involved in your investments. Even though you may not want to hear it, a great adviser will tell you, if necessary, that you need to save more money and invest less aggressively.
Just about any adviser can help you determine the proper mix of stock funds and bond funds. A great one will also help you maximize your expected returns by using the best low-cost funds in each asset class.
A great adviser will help you make the right choices with investments that he cannot manage directly, such as a variable annuity or your 401(k) or similar retirement plan. Some advisers charge for this service, while others don’t.
Your adviser can help you initiate the sometimes-awkward discussions you should have with your children, your parents, your spouse or other relatives concerning wills, health-care issues and finances. These conversations can be extremely important, but too often they never happen because people don’t know how to go about it.
A good adviser can help couples negotiate their spending levels before and after retirement. Very often, one spouse is more of a spender and the other is more a saver. Over the years I helped many couples find solutions that preserved their financial viability — and their relationships.
Your adviser should get to know and gain the trust of your spouse, your partner or your grown children so they understand the plan behind your investments — and so that your adviser can help them after your death. This can be especially valuable to survivors who do not know a lot about investing or who may not be comfortable taking charge of financial assets.
While I always hope my readers won’t have to go down this path, I know that many people wind up in divorce court. If this happens to you, your adviser should be able to help you and your spouse gather information and evaluate various options. In some cases your adviser may also recommend another adviser for your spouse — one who will not take undue advantage of him or her.
If you have aging parents who don’t have (or need) an adviser of their own, your adviser should help you suggest to them the best ways to use and preserve their assets. When I was an adviser, I helped the parents of many clients, at no extra cost, move their money from certificates of deposit into better paying Vanguard bond funds. Sometimes this doubled or even tripled their cash flow with very little additional risk.
A great adviser will have already done the necessary due diligence to find competent attorneys who don’t gouge their clients and who will help them steer clear of unnecessary (and sometimes very expensive) arrangements that can benefit legal professionals more than clients.
A great adviser understands home ownership and mortgages and can help clients decide if and when it makes sense to refinance. When refinancing does make sense, a great adviser will know where to look for the best rates and the best service — and how to avoid the mortgage traps that snared so many people over the past few years.
A great adviser will help you choose the most advantageous time to begin taking Social Security and the best choices in selecting pension options.
Your adviser should give you guidance on which investments to keep and which ones to consider selling. A great adviser can help you accept the need to occasionally get rid of investments that turned out to be mistakes (sometimes turning paper losses into real ones).
You should be able to get many of these services from your adviser at no extra cost. Over time, that could make him one of the best investment bargains you’ll find.
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