In today's volatile financial markets, it's more important than ever to know that your portfolio is being properly managed. Here are some tips for finding a qualified financial professional whose focus is on meeting your financial goals.
Ask if your money manager opportunistically changes the asset allocation of your portfolio, or if they instead stick to some fixed strategic allocation no matter what the market conditions are. Most portfolio managers claim to be actively trading, but changing the asset allocation is a different kind of risk management than just rebalancing to fixed percentages. You have to consider how comfortable you are with your asset percentages in stocks and bonds staying the same. Reallocating your assets as market conditions change sounds good in theory, but many investors are reluctant to change large segments of their portfolios.
You should also ask if whether the firm's investment objective is to outperform a benchmark, or are they trying to earn absolute returns. Often, a close look at a firm's track record would reveal that they made money in just one small bull or bear market. They might not do as well in all of the other market periods. You should also ask if their stock and asset management practices conform to the GIPS performance standards. GIPS stands for global investment performance standards. Firms can be less than forthcoming when presenting you with their historic performance data. Some firms will say that they only do customized portfolios, which prevents them from being able to present an overall track record. You want to go with an investment firm with a real track record that conforms to the highest reporting standards.
A financial adviser will help you to identify your financial and lifestyle needs and goals, such as:
Some people think that say they don't make enough money to see a financial adviser, but everyone needs a financial adviser. Financial advisers don't cost that much despite what people think. It's true that some advisers only want rich people, but there are many advisers who cater to a wider demographic. There are even some investment advisers that cater to millennials. Young people wondering about how to get rid of student debt or budgeting for an apartment can be helped a tremendous amount by getting good financial advice.
Talk to more than one financial adviser and let them know you're actively comparting. Remember, you're trusting them with safeguarding and growing your assets, so give them a thorough vetting. Are they a licensed financial adviser? What type of advice can they provide? Also, ask how they're paid and who they work for. Do they work on fee or commission? Do they want to have control of your entire portfolio?
When you meet the adviser, try to gauge their financial experience. Don't get caught up in whatever products they are trying to sell you. Give general information about yourself and your goals, take notes and ask for their expert advice. Do not feel you are compelled into having to sign on as a client when you're done talking to them.
You want an advisor who gives sound advice that and who will not say silly things like "I'm going make you rich." Their job is to slowly grow your money, not to make you rich. If somebody makes you a promise that they can increase your money twenty percent every year guaranteed, then run the other way. You don't want to get yourself involved in any Madoff-style Ponzi scheme. Madoff was the so-called custodian of his client's money, and his clients paid dearly for that. You need a third party like Schwab or a TD Ameritrade who will keep the money for you safely outside of your investment advisor's reach.
You can start your search for a licensed financial adviser through word of mouth. Ask friends and colleagues about their own experiences soliciting the advice of financial advisors. There are organizations you already deal with, such as banks, credit unions, accountants, insurers and even your own workplace. You can also search the Internet for advisor reviews.
You can also listen to plenty of good financial advice for free just from podcasts and even from joining an investment group. In the end, you need to compare and consider all your options before signing on with a financial advisor.