It’s not hard to find advice on
how to manage your money these days. You can find plenty of it
on the Internet, in books, magazines and newspapers, from well-meaning
friends and relatives, and of course, from professional advisors.
But while finding financial guidance is easy, judging the worth
of it can be a much tougher task. Even hiring a professional adviser
is no guarantee you’ll get great advice. If you’re paying
someone for a personalized plan, though, you especially want to
make sure you’re getting your money’s worth.
The true test is whether you reach your goals. But if your goal
is decades away – retirement, for example – you don’t
want to wait until age 65 to see if you made the right moves.
I would encourage people to look at their overall situation no
less than annually and assess the quality of the service they’re
getting.
So what things should you look at? Ask yourself these questions
when gauging money advice:
What are the numbers? The most obvious way to judge investment
advice is by performance. But make sure your expectations are
realistic.
If you have a diversified portfolio, you’re going to outperform
the worst asset class but under perform the best. With that in
mind, don’t look at just your pure rate of return. You don’t
have to be in the year’s highest flying mutual funds and
stocks to succeed.
Instead, you and your advisor should quantify your goals when
creating your financial plan.
That plan should include periodic, realistic mileposts to check
your progress against. If your net worth isn’t growing as
fast as you’d forecast, examine why. Maybe it was just a
down year in the market. Or maybe you’ve been too cautions
with your investments and need to make a change.
What does your gut say? Can you stomach the investment risk they’re
taking?
The real key is to remain invested.
Some discomfort is normal. You’re not going to gain anything
without taking risks. But if you’re so nervous about the
risk you’re taking that you cannot stay invested, you need
to talk to your advisor. If you’re always buying at the top
and selling at the bottom, you won’t build wealth.
You also should pay attention if your gut feeling is telling you
that your advisor isn’t being honest with you.
If it doesn’t feel right, it probably isn’t. If your
advisor doesn’t listen to you, doesn’t return your phone
calls, does some kind of trading in your account that you didn’t
know about, you need to raise your hand and say something.
Have you been following the advice?
If you haven’t put your plan into practice, what’s stopping
you? If it is because the suggestions are too complex, and you
don’t understand them or they make you uncomfortable, talk
to your advisor.
Why pay for counsel you’re not going to use? If your planner
won’t listen, you may need to hire someone else.
Is the advice clear to you?
I really believe that the way an advisor speaks to a client is
very important. Sometimes people who aren’t confident about
something use lingo to make themselves appear to be an expert.
Also, it’s crucial for you to understand the money moves
you are making – and why you’re making them.
We need to be responsible for our financial futures. If you abdicate
responsibility and say ‘So-and-so will take care of it’
you may find out when it is too late that so-and-so wasn’t
taking care of it.Is your advisor a good listener?
Responsiveness is a key thing. Many people have questions. Are
you getting good answers to those questions?
I would be concerned if an accountant said ‘don’t worry
about those details. Just trust me.’ People are entitled
to understand what they are doing and why.
You should feel comfortable enough with your advisor to ask anything.
Most of us don’t want to embarrass ourselves or admit we
don’t understand something, but it’s very important
to feel OK saying ‘I don’t have a clue what you’re
talking about.
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