From homeschooling our children to shopping at Home Depot, we’re increasingly a do-it-yourself culture, bypassing professionals to save. Why pay for professionals or experts when investing? DIY can play a role when you handle your money, just maybe not the role you think.
OK, so how much do you pay for health care? Why pay anything when you can diagnose yourself or find treatments online? Such rhetorical questions ought to get you thinking about what you’re really doing with your money.
I suspect you ultimately need the medical expert. Yet when it comes to money — something planning professionals work at full time, and sometimes more — you might believe you can budget and save better as a hobby.
As I wrote on the value of financial advisers, value comes from a focus on those things that you can actually control; markets and economies are beyond any one person’s power. Learn how to set the sails instead of trying to control the wind. And get help with the sails.
Yes, you do need to exercise care that the person you choose has your interests at heart. Maybe you just don’t trust financial advisers because you don’t know how to find the right one for you.
Here’s a questionnaire that advisers can complete for you before you even meet. Use the answers, DIY-style, to select those two or three advisers you want to meet with at the next stage. Mistakes with your money can cost you more than any fees, so select an adviser carefully.
Regarding how advisers are paid, broker-dealers buy and sell investments for clients and receive commissions as compensation. Registered investment advisers are in investment consulting, are registered either with the Securities and Exchange Commission or a state securities authority, and may be paid via flat fees or a percent of your assets they manage. These fee-only financial advisers receive no commissions, trading fees, or product reimbursements of any kind.
Among advisers’ certifications and designations:
- A certified financial planner (CFP) must take college-level financial planning courses, log at least three years’ experience in financial planning, and pass a 10-hour examination.
- A chartered financial consultant (ChFC) studies college-level insurance, estate planning, retirement funding, investments, and other subjects in financial planning.
- A chartered financial analyst (CFA) studies security analysis, stocks, bonds, investment management, and corporate finance.
Also learn to recognize the difference between investing and planning. Think of investing and structuring your portfolio’s allocation like entwining bundles to make a cable. A single strand inside each bundle represents each company in which you hold stock.
Each bundle represents companies with common characteristics — large or small companies, growth companies, U.S.-only firms, and so on. Some call this asset-class investing; the three main asset classes are equities (stocks), fixed-income (bonds), and cash equivalents (money market instruments).
All the bundles together represent your well-diversified portfolio, the cable holding up your long-term goals. A good adviser can help you with both entwining the cables and supporting your long-term goals.
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Larry R. Frank Sr., CFP, is a Registered Investment Adviser (California) in Roseville, Calif. He is the author of the book Wealth Odyssey. He has an MBA with a finance concentration and B.S. cum laude in physics, with which he views the world of money dynamically. He has peer-reviewed research published in the Journal of Financial Planning. http://blog.betterfinancialeducation.com/.
AdviceIQ delivers quality personal finance articles by both financial advisers and AdviceIQ editors. It ranks advisers in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisers, so only those with pristine regulatory histories can participate. AdviceIQ was launched January 9, 2012, by veteran Wall Street executives, editors, and technologists. Right now, investors may see many adviser rankings, although in some areas, only a few are ranked. Check back often, as thousands of advisers are undergoing AdviceIQ screening. New advisers appear in rankings daily.