It’s hard to know who you can trust. Investors need to be purposeful when selecting a partner to manage their investments. Three major considerations:
Brokerage companies charge commissions on trades, so brokers (“advisors” or “representatives”) take a commission from each transaction. This allows your broker to profit even if he or she delivers poor returns.
Wealth management companies offer a wide range of services and generally charge on a “fee-only” (or percentage) basis. These companies only make more money when you do, so you’re always sitting on the same side of the table. In addition, many of these companies are fiduciaries: held to the highest legal standard of care.
Education and Experience
In an industry that’s constantly evolving, “we’ve done it this way for a long time” isn’t a formula for success. While experience is valuable, it’s crucial that your professional stay up-to-date on innovations and trends in finance to give you the best possible advice. Check your professional’s email signature for alphabet soup: designations like CFA, CFP, and CAIA are difficult to achieve and demonstrate a commitment to continuing education.
Just like marriage, investment relationships work best when both parties value and respect each other. While you shouldn’t select an investment manager who is unqualified or a poor match for your needs, the highest priority is finding a true partner that cares about you and your goals. If your professional truly wants you and your family to succeed, the odds go up significantly that you will.
• Not FDIC insured • Not guaranteed by the bank • Not a deposit • Not insured by any federal government agency • May go down in value