Do I Need an Investment Professional?
Dear Ruby,
Do I really need to hire an investment professional? I feel like I’m pretty savvy about stocks and bonds. I mean, I don’t always have time everyday to monitor every detail, but is that really necessary? Are investment professionals worth it?
Who Should Hire an Investment Professional?
Are you the type of person who will read as much as possible about potential investments and ask questions about them? If so, maybe you don’t need investment advice. But if you’re busy with your job, your children, or other responsibilities, or feel you don’t know enough about investing on your own, then you may need professional investment advice.
WARNING! Before You Invest Always Check with the SEC and Your State’s Securities Regulator: Is the investment registered? Have investors complained about the investment in the past? Have the people who own or manage the investment been in trouble in the past? Is the person selling me this investment licensed in my state? Has that person been in trouble with the SEC, my state, or other investors in the past?
What are the Different Kinds of Investment Professionals?
Investment professionals offer a variety of services at a variety of prices. It pays to comparison shop. You can get investment advice from most financial institutions that sell investments, including brokerages, banks, mutual funds, and insurance companies. You can also hire a broker, an investment adviser, an accountant, a financial planner, or other professional to help you make investment decisions.
Some financial planners and investment advisers offer a complete financial plan, assessing every aspect of your financial life and developing a detailed strategy for meeting your financial goals. They may charge you a fee for the plan, a percentage of your assets that they manage, or receive commissions from the companies whose products you buy, or a combination of these. You should know exactly what services you are getting and how much they will cost.
Are Investment Professionals Free?
Remember, there is no such thing as a free lunch. Professional financial advisers do not perform their services as an act of charity. If they are working for you, they are getting paid for their efforts. Some of their fees are easier to see immediately than are others. But, in all cases, you should always feel free to ask questions about how and how much your adviser is being paid. And if the fee is quoted to you as a percentage, make sure that you understand what that translates to in dollars. In contrast to investment advisers, brokers make recommendations about specific investments like stocks, bonds, or mutual funds. While taking into account your overall financial goals, brokers generally do not give you a detailed financial plan.
Are Investment Professionals Free?
Brokers are typically paid commissions when you buy or sell securities through them. If they sell you mutual funds make sure to ask questions about what fees are included in the mutual fund purchase.
Brokerages vary widely in the quantity and quality of the services they provide for customers. Some have large research staffs, large national operations, and are prepared to service almost any kind of financial transaction you may need. Others are small and may specialize in promoting investments in unproven and very risky companies. And there’s everything else in between.
What’s the Difference Between a Discount Broker and a Full-Service Broker?
A discount brokerage charges lower fees and commissions for its services than what you’d pay at a full-service brokerage. But generally, you have to research and choose investments by yourself. A full-service brokerage costs more, but the higher fees and commissions pay for a broker’s investment advice based on that firm’s research.
The best way to choose an investment professional is to start by asking your friends and colleagues who they recommend. Try to get several recommendations, and then meet with potential advisers face-to-face. Make sure you get along. Make sure you understand each other. After all, it’s your money
A ROADMAP TO YOUR JOURNEY TO FINANCIAL SECURITY: U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, 100 F Street, N.E., Washington, D.C. 20549-0213, Toll – free (800) SEC-0330, Website www.investor.com
