Picking Someone To Help Manage My Money
Picking someone to assist you with the investment management process can be a daunting task. The purpose of this blog post is to assist the retail investor in navigating this process. The following are some questions they should be asking themselves and their potential new advisor.
What Are Their Qualifications?
People who provide investment advice come in many shapes and forms with the industry having changed over the years. It is best practice to do your own due diligence and shop around when looking for someone to assist you with investment advice and financial planning. They should at the very least be a licensed professional and be registered on brokercheck.org or the Investment Advisor Disclosure page. These pages will offer work history information as well as any previous disclosures/complaints made against said licensed individual. Some other credentials to consider would be the Certified Financial Planner or CFP, Chartered Financial Analyst or CFA, as well as additional in industry experience.
How Do They Get Paid?
When you are working with someone who helps manage your money there are many ways in which they can be compensated and by many people, (not just you). Some advisors charge a commission on each trade while others charge an annual fee for investment advice. Whether you are more comfortable being billed one way or the other, each method of billing has it’s own pitfalls to look out for. If you are being charged a commission on each trade something to lookout for is what is known as churning. In short churning is excessive trading in an account in order to generate a commission. If you are paying someone an annual fee for investment advice or to manage an account it would be beneficial to be on the lookout for reverse churning. Reverse churning is essentially the failure to provide ongoing investment advice and/or work while collecting a fee for said advice. For more information on churning and reverse churning please see this Investopedia article.
What Services Do They Provide To You?
When meeting with a financial professional ask what value they actually provide. Will they help you develop a financial plan? What is their investment philosophy? Do they own individual stocks or strictly exchange traded funds and mutual funds in client portfolios? When you call them do they get back to you in a reasonable amount of time?
What Standard Are They Held To?
Fiduciary standard vs suitability standard. This is another consideration when picking a fiancial professional to help manage your money. Registered Representatives of Broker Dealers are held to a suitability standard meaning the investments that they sell you have to be suitable to your needs. When a financial professional is held to a fiduciary standard that means they have to act in what they feel is in your best interest when representing you, putting your own interests before their own legally. For further information on this topic please see this Investopedia article.
These are only a few of the considerations that should be considered when picking someone to help manage your own hard earned dollars. For more information please schedule a consultation with Conviction Wealth Management LLC. Our Registered Investment Advisor Representative would be happy to answer any questions you may have.
Disclaimer: This blog post is meant for purely for general educational purposes and does not represent investment advice made by Conviction Wealth Management LLC. Conviction Wealth Management LLC. is a Registered Investment Advisor in the State of New Jersey, Investments inherently have risk of loss and past performance does not guarantee future returns/performance. For an investment recommendation please consult an investment professional.
