Comes a time in of our lives with some or most of us when we conclude that we of course need person smarter than we are at managing money. person to give us some good solid guidance on where to stash it, support it, grow this diminutive nest egg into something better for our golden years. You may conclude to talk to the good folks at Edward Jones, Ag Edwards, or Team Edward. You may find yourself talking on the phone with a soothing voice asking deeply personal questions about your annual income, risk tolerance, and investing knowledge.
A simple Google hunt with these words: "Picking a Financial Adviser" will yield a plethora of articles with solid guidance on picking solid advice. The Wall road Journal, Msnbc, Kiplinger's, and the Motley Fool all weigh in with some good pointers. Well, this narrative will give you a perspective not easily found with a Google search.
First of all, let's start with the plan that You are fundamentally your own best financial adviser. You made this money, you traded your precious, irreplaceable time for this stash. You know what you owe, what you want, and what you owe on your reputation card bill (should be zero!). A ten-minute conversation with a complete stranger, who may or may not take the primary interest in your background to get a complete photo of your life and time to come goals, is not likely to yield good advice. They will take your answers to their generic background questions, plug them into a spreadsheet, and come up with a recommended mix of smallcap/midcap/largecap/bonds/cash funds that is "perfectly suited" to your retirement profile. Uh-huh, sure.
Let's step back a second to the plethora of good articles, and they are good. Well researched, solid adequate information. The Wall road Journal piece goes on about needing to check references and examining how the advisers get paid, Kiplinger talks about how financial advisors are handsomely paid (indeed!), and the Motley Fool of course has some good pointers and clever points to ask about Iras (I learned a few things there). You should consider that these articles and others say. You should also consider other questions entirely.
As I said before, the questions below are a bit unorthodox, but they could be productive at interviewing persons for a very foremost position. Would you trust a person you don't know very well with the keys to your car? Your car, after all, is a quantum of your assets. Why then would you trust them with an even bigger portion, without asking some hard questions?
Here we go.
Question One: As soon as they pop the demand "What is your annual income", turn the tables a bit and ask them about theirs. And how much did you make last year, Mr. Financial SmartyPants? If this seems like an uncomfortable question, it should be. But it sets the stage for a conversation. Remember that you are in essence performing a job interview for a very foremost task. It is not unreasonable to expect to get this kind of knowledge.
Question Two: Ask them about their debt level. How much do they have in mortgage, second mortgage, car loans, and specifically reputation card debt. Again, it may be uncomfortable to ask, but it will without fail give you an comprehension into the character of the person in front of you that you're consider hiring to administrate money. If they can't administrate their own cash flow, how are they going to administrate yours? What if this person is loaded up with debt up to their eyeballs? They may need the revenue badly adequate to propose investments with high commissions (for them) and high costs (for you).
Question Three: What do you think about precious metals as an investment? This is the demand most likely to yield some hemming and hawing. If they pooh-pooh the value of retention at least a small quantum of your briefcase in corporal gold or silver, that should be a negative mark in your evaluation. There is a speculate that most folks peddling financial products and investments don't much care much about precious metals, there's precious diminutive money in it for them. No big commissions or incentives. But there's no demand that gold and silver have outperformed the stock shop by a wide margin over the last 10 years. A fair respond would be something along the line of "I don't know much about investing in precious metals", because a lot of financial folks in fact do not.
Question Four: Ask them how they did in 2008, and how far they've recovered. Again, not their model portfolios, or their customers portfolio, but them personally. Their own 401K or Iras. No demand that folks' investments took a hit in 2008. But a key indicator of their financial acumen will be how fast they recovered, if at all. If they say that they're still down from the high water mark, but hey, they're in it for the long haul, blah blah, again that should be a negative estimation mark in your checklist.
Question Five: Ask them to propose a stock with a dividend yield of at least 6 percent and a low P/E ratio. Not that hard to do, a simple stock screener on Yahoo or Google will give you at least 6 or 7 companies directly, and a dozen other suggestions that come close. This type of revenue producing investment should be right at the tip of their tongue. Don't let them come back with a recommending an equity income/growth fund, because individual stocks are risky, you want to spread your risk around, on and on. True adequate in some respects, but it doesn't take much more skill or knowledge than you have at picking mutual funds (especially ones that the financial adviser's company gets a commission from).
That's all for now. Hope this helps.
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