Are
You Getting Good Financial Advice?
Don’t
Just Look At Numbers; What’s Your Gut Telling You?
It’s
not hard to find advice on how to manage your money these days. You can find
plenty of it on the Internet, in books, magazines and newspapers, from
well-meaning friends and relatives, and of course, from professional advisors.
But
while finding financial guidance is easy, judging the worth of it can be a much
tougher task. Even hiring a professional adviser is no guarantee you’ll get
great advice. If you’re paying someone for a personalized plan, though, you
especially want to make sure you’re getting your money’s worth.
The
true test is whether you reach your goals. But if your goal is decades away –
retirement, for example – you don’t want to wait until age 65 to see if you
made the right moves.
I
would encourage people to look at their overall situation no less than annually
and assess the quality of the service they’re getting.
So
what things should you look at? Ask yourself these questions when gauging money
advice:
What
are the numbers? The most obvious way to judge investment advice is by
performance. But make sure your expectations are realistic.
If
you have a diversified portfolio, you’re going to outperform the worst asset
class but under perform the best. With that in mind, don’t
look at just your pure rate of return. You don’t have to be in the year’s
highest flying mutual funds and stocks to succeed.
Instead, you and your advisor should quantify your goals when creating your financial plan.
That
plan should include periodic, realistic mileposts to check your progress
against. If your net worth isn’t growing as fast as you’d forecast, examine
why. Maybe it was just a down year in the market. Or maybe you’ve been too
cautions with your investments and need to make a change.
What does your gut say? Can you stomach the investment risk they’re taking?
The
real key is to remain invested.
You
also should pay attention if your gut feeling is telling you that your advisor
isn’t being honest with you.
If it doesn’t feel
right, it probably isn’t. If your advisor doesn’t listen to you, doesn’t
return your phone calls, does some kind of trading in your account that you
didn’t know about, you need to raise your hand and say something.
Have you been following the advice?
If
you haven’t put your plan into practice, what’s stopping you? If it is
because the suggestions are too complex, and you don’t understand them or they
make you uncomfortable, talk to your advisor.
Why
pay for counsel you’re not going to use? If your planner won’t listen, you
may need to hire someone else.
Is the advice clear to you?
I
really believe that the way an advisor speaks to a client is very important.
Sometimes people who aren’t confident about something use lingo to make
themselves appear to be an expert.
Also,
it’s crucial for you to understand the money moves you are making – and why
you’re making them.
We
need to be responsible for our financial futures. If you abdicate responsibility
and say ‘So-and-so will take care of it’ you may find out when it is too
late that so-and-so wasn’t taking care of it.
Is
your advisor a good listener?
Responsiveness
is a key thing. Many people have questions. Are you getting good answers to
those questions?
I
would be concerned if an accountant said ‘don’t worry about those details.
Just trust me.’ People are entitled to understand what they are doing and why.
You
should feel comfortable enough with your advisor to ask anything, Holman says.
Most
of us don’t want to embarrass ourselves or admit we don’t understand
something, but it’s very important to feel OK saying ‘I don’t have a clue
what you’re talking about.’