Financial Advice Aplenty: Whom Should You Listen To?

USA Today has an article that everyone seeking advice from a financial planner should read. It's about getting financial advice and determining who to listen to -- and who to ignore. Here's the introduction:

"Admitting that you need investment advice is tough enough. But figuring out where to get that advice — and how to pay for it — can be a taxing decision. Getting sound financial advice comes down to finding a skilled, trustworthy adviser. This may sound obvious, but regulators are finding that too many investors are starting relationships with advisers, paying their fees and then getting little back in return. Even worse, some advisers won't tell investors if the services and products they're paying for don't make sense for their needs."

Think this isn't a problem? Check this out:

"Earlier this week, the National Association of Securities Dealers fined Morgan Stanley $1.5 million and ordered it to pay $4.6 million in restitution to 3,549 investors. The charge: failing to monitor investors in fee-based brokerage accounts, which usually cost a percentage of the assets being managed, to see whether these investors would be better off paying commissions."

Here's some good advice:

"To be sure, every adviser needs to get paid somehow, so one who charges a flat fee may not necessarily be more ethical than another who charges a commission for every product. But you need to carefully scrutinize advisers' credentials and compensation to figure out what their responsibilities are to you, and whether they'll put your financial interests ahead of theirs."

And something to remember:

"One thing's certain: Most advisers will have some conflict of interest no matter how they're paid. It's just a matter of figuring out what it is and whether you can live with it."

USA Today then gives five questions to ask an advisor:

1. What are your credentials, and where are you registered?

2. How are you paid, and what services does this fee include?

3. Are you required to put my interests first or just to make suitable recommendations?

4. If you are a registered investment adviser, will you give me a copy of part one and two of your ADV form?

5. Do you have other clients with similar goals and assets to mine?

The article then ends with the pros and cons of each type of advisor. It's very informative.

If you still need additional information after reading it, the article recommends you visit The Financial Planning Association for an article titled "Know How Your Financial Planner Charges".

Update: Time to link to the Beltway Traffic Jam.

Comments

[nickel]

I'm biased, but I think that you should listen to me.
--
http://www.fivecentnickel.com/

[jim]

I briefly interviewed JLP of AllThingsFinancial a little while back about financial advisors:

http://www.bargaineering.com/articles/interview-with-a-financial-advisor-jlp.html

[Michael Blackburn]

Well, I did learn something from this article: the headline was so clumsy I was sure they'd misused "whom." In fact, it turns out no, AND I learned a good rule to tell which is correct.

You simply take the question, and rephrase it as a statment using he or him. If "him" is correct, "whom" is correct. In this case, the headline becomes "You should listen to him" (rather than "You should listen to he"), so "whom" is correct.

As a counterexample, the classic "Whom shall I say is calling?" is a hypercorrection; you wouldn't say "I should say him is calling." would you?

Of course, if they'd just called the article "To whom should you listen?" I would have never found this nugget of wisdom.