Objective, intelligent financial advisors can be hard to find because most financial advisors sell products. This means they make their living by selling you a product that carries a commission – and the higher the commission, the better. This is what makes various tax-deferred annuity products so popular in the market. They are very high commission products.
So are the managed accounts offered by brokerage firms, in which the managers select mutual funds or stocks for you. All the brokerage accounts are moving in this direction because they need the high commissions to succeed. They try to accumulate assets from people, put them into packaged accounts, and say, “You don’t need think about it any more – we have the best people.”
Here are my guidelines for choosing a financial advisor:
- A high commission is never okay.
So many peopole don’t know what else to do. They think, “Everyone’s putting their money in this firm and it’s a big company with an established name, so it must be okay.” But if it’s a high commission, it’s never okay. - Find a fee-only financial advisor.
Some financial planners don’t sell products. Instead, they charge you purely for their advice. If you want them to manage your money, they charge you 1% for money management and they put your money into no-load (no commission) mutual funds. These fee-only financial advisors are the advisors that I recommend. - Check out the National Association of Personal Financial Planners (NAPFA)
This is one place where you can find fee-only financial planners. - Or try Garrett Planning Network.com.
Garrett Planning Network is another such resource. They work very much with middle income people and have only one fee – they charge only fees for their advice. - Don’t be fooled by “fee-based advisors.”
Some advisors who charge commissions try to look like fee-only advisors by calling themselves “fee-based advisors.” Don’t be confused. A fee-based advisor is still selling a product, whether it’s a packaged mutual fund account or an annuity. You want a fee-only advisor and you will know it because, in fact, there are no commissions on the product he or she sells.
Ok I thought I responded yeserday but I guess it didn’t get saved.
Jane, I read “Making the most of your Money” years ago and it was the basis for how I take care of my finances now. It was a wonderful book. Now if you could just tell me how to make money in the stock market I would put you on the same status as God. LOL
I just realized you are a role model for me and have updated my profile.
Thank you for all those nice words! If you have my book, you know how to make money in the stockmarket…. don’t buy individual stocks, buy index mutual funds and hold on.All best,
Great advice. I thought I had a Financial Planner I could trust. Then he suggested I put some “cash” into a no-risk investment. He failed to talk to me about the small print and I lost big on the cash portion of my portfolio. It was pure greed on his part and I paid the price. I fired him and I now have a self-directed retirement savings plan, but I need to talk to a fee-only advisor. Thank you for the reminder.
I’m heading towards 50, and the biggest lesson that I learned was not to co-sign for anyone (family or friend). (I had also started a response earlier saying) It’s one thing to lose everything and be responsible for that. It’s all together different to be held responsible for someone else’s mistakes.
I’m looking for ways to continue saving and would like to begin to put money away into a mutual fund or roth ira. I had been waiting for the seasonal sales to make some essential purchases this December. Now, I’m on a payment plan for my school fees for courses that I’m taking and working a part time job, taking in ~$380/mth. Situations led me from a JOB, home, cars, etc to this circumstance, and I thank God that I have a family who has been here to support me through this transition.
I feel very good about who I am now, and I’m looking forward to seeing what is going to happen next.
I like Roth IRAs, but build up a stash of bank savings first.
Jane, thanks for this. I’ve just started working with a new financial planner who really understands the word plan, and I couldn’t be happier. I usually find assistance through personal referrals, thinking I can trust the friend of a friend, but I met this person through an ad in the MENSA bulletin. What a relief to feel he understands my situation and isn’t trying to force any particular investments on me. I’ve lost way too much money in the past by following sound advice from individuals I now wish I had never trusted.