Over the past 110 years, investors have lived through several bear markets and lots of “market corrections”. In fact, these 2 circumstances have been the “norm” for at least one-third of the time. But bad periods for stocks have always been followed by long and sometimes strong rising trends. Of course, you can never be sure when the rise will begin.
To develop an effective investment strategy, you need to have a good understanding of where you are in life and your personal tolerance for risk. Knowing this will help you determine what percentage of your assets you should invest in stocks.
Who can you trust to help you develop an effective investment strategy? I recommend only seeking advice from an Objective Financial Advisor- an advisor who must, by law, give advice that’s in your best interest. Make sure your investment strategy is sound by insisting your advisor is objective. Begin by asking them the
15 “Must Ask” Questions for a Financial Advisor. The right answers to those questions can help you sleep better at night.
In earlier blog posts, I’ve been strong in stating my opinion that independent advisory firms offer you a better value than large institutional brand name firms that you see advertised on television every day.
But what happens if your independent financial advisor suddenly passes away? That could pose a major problem. That’s why I also recommend that you ask to see your advisor’s written succession plan- their safeguard for you, in case an emergency arises. The succession plan will lay out the procedures and the names of the people who would handle your affairs in case of an accident or other unexpected event.
What percentage of advisors have a succession plan? Only 11%. Make sure your advisor is part of that small percentage.
The importance of doing business with an “independent” financial advisor can’t be overstated. Advisors that work for institutional brand name firms that you see advertised on television every few minutes have a “Master”: the firm that writes their paycheck. Those advisors have an agenda: Satisfy the bottom line profits of the company. This could mean that the advisor is required to give advice that’s not necessarily in your best interest.
Although not all Independent financial advisory firms are created equal, at least independent advisors don’t have a “big brother” dictating what they can and can’t advise to their clients.
One of the 15 “must have” characteristics of an advisor who is a member of the National Alliance of Objective Financial Advisors is “independence”. The only “Master” they have is their client.
Over the years, I’ve had hundreds of people call me needing help with long-term care planning. My advice has always been the same: LTC Planning is an integral component of financial planning. Because of that, a person should seek advice from an objective financial advisor about how to plan for long-term care. The response is usually: “I’m not sure if my advisor is objective.” Or, “I don’t have an advisor, how do I go about finding an Objective Financial Advisor?”
One particular caller was a widow. She was only 49 and had 3 young children. Her phone rang off the hook after she received a multi-million dollar settlement for her husband’s accident at work. People calling themselves financial advisors had sold her all types of financial products, including large life insurance policies on her young children. I immediately referred her to an Objective Advisor, who helped her get out of the mess she was in, including cancelling that life insurance on her kids!
Getting objective financial advice is important because the thousands of dollars you might spend on financial products you don’t need can mean the difference between a carefree retirement and a retirement made up of daily struggle.
I’ve gotten some negative comments from financial advisors who sell insurance. They’ve read my blogs and articles which adamantly advise people to steer away from financial advisors who sell insurance. Some advisors who sell insurance disagree with my recommendation and some are downright “nasty” with their rebuttals.
So why I do say that you shouldn’t trust your financial future to financial advisors who sell insurance? Because after serving advisors and their clients with long-term care planning for the past 23 years, I’ve noticed that advisors who sell insurance have a difficult time with being unbiased. When a potential commission is involved, too often advisors recommend insurance that’s not appropriate or not needed at all.Are there exceptions? Absolutely! There are probably advisors who sell insurance simply because they haven’t been able to find a reliable, predictable insurance resource for their clients,so they sell it themselves. But it would be an extreme exception for a serious financial advisor to not be able to locate an agent who would probably serve the needs of his or her clients.
So in my opinion, it’s best to exclusively trust an advisor who provides ADVICE only and DOES NOT sell insurance (or any other financial product for that matter).
By the same token, I recommend not taking financial advice from someone who is really nothing more than an insurance agent. In an effort to clean up the image of the industry, the insurance industry has started marketing their services as “financial advice” and are training their agents to position themselves as “financial advisors”. Don’t fall into that trap either!
objectivefinancialadvisors.com
Do most investment consultants have your best interests in mind? You might think so, especially if those advisors have the required credentials. You’d be wrong.
Most financial advisors are NOT required by law to have your best interests in mind, even some of those that have several letters behind their names. In fact, most advisors, regardless of credentials, are required to act in the best interest of the party writing their paycheck: The insurance companies, mutual fund companies, or the large institutional investment firms that support them financially. Too often, these advisors recommend that you buy a financial product or use a certain investment strategy simply because it makes them and their company more money that the alternatives.
How can you make sure that your advisor is acting in your best interest? Make sure your advisor is held to a “Fiduciary Standard”. This can be done by asking them to sign something that says they are bound by this standard. If they refuse, I recommend terminating your relationship with the advisor.
All members of the National Alliance of Objective Financial Advisors (NAOFA) must act in the best interests of their clients- they are held to a Fiduciary Standard. It’s one of the 15 questions that must be answered properly in order to receive an invitation to join the Alliance. Request your free guide,
15 “Must Ask” Questions for a Financial Advisor, in the bar to the right.
A Merrill Lynch financial advisor told me recently that he’s frequently having to reassure his clients that the parent company of Merrill Lynch, Bank of America, isn’t headed for insolvency.
Bank stocks have been hurt badly during the recent downturn in the market, with Bank of America close to the top of the list of battered banks. Clients are wondering if their money is safe at the bank, and advisors working for Merrill Lynch definitely have their work cut out for them explaining why clients should keep their money with the firm when there seems to be safer places.
During the stock plunge and financial crisis of 2008 and 2009 did you notice that it was large brand name financial companies that had to be bailed out with taxpayer dollars? The large firms that had gotten so successful that they were “too big to fail.”
You’ll notice that independently owned financial advisory firms didn’t run to the government looking for assistance. Why? Because they weren’t invited to the party? No, because they knew from the beginning that they had to run their businesses like a business, or be put out of business.
In my opinion, your money is safest with a financial advisory firm that is independently owned and operated. That being said, the firm MUST adhere to and be able to correctly and competently answer the “15 Must Ask Questions”.
With all the uncertainty in the economy and the volatile markets, investors are being scammed more than ever. Con artists exploit the fear of people who are unprepared and unsure of how to get advice from the right type of financial advisor.
The hottest areas for scams include real estate, gold and other precious metals, life settlement contracts and stocks. In most cases, the con artist gets a person’s trust by selling their alleged expertise. In most cases, they promise rates of return that are unrealistic but certainly enticing to those who are eager to double or triple their money in a short period of time.
Never allow your emotions to take control of money decisions. If an opportunity looks too good to be true, it probably is. And take the time to learn about the advantages of an Objective Financial Advisor, spercifically a member of the National Alliance of Objective Financial Advisors.
The large majority of people who call themselves financial advisors are simply insurance agents or money managers. Of course, insurance planning and investing are important components of financial planning but when a so-called advisor places too much emphasis on one particular component of financial planning, you’re not being properly served and it’s dangerous to your financial health.
Instead, hire a financial advisor that uses a “comprehensive approach” to helping you with your money. This means using an advisor who never sells any type of financial product, and never has an incentive to guide you to a specific type of investment. It also means hiring an advisor who has a balanced approach to all 7 areas of financial planning:
1. Setting financial and estate planning objectives2. Insurance planning and risk management3. Employee benefit planning4. Investment planning5. Tax planning6. Retirement planning7. Estate planning
Members of The National Alliance of Objective Financial Advisors are bound by bylaws that require them to offer Comprehensive Financial Planning.
