written by reader Looking for a Financial Advisor

By Anonymous Questions, September 14, 2012

I am looking for a Financial Advisor and wanted to know what key questions to ask, how to pick one out, and any other help available. It seems they all put charts in front of me with the intention of telling me in ” hypothetical ways ” how my money will best be placed to work the hardest. Yet not one them has offered any Stock fund with good companies reinvesting dividends. All want mutual funds. Is your philosophy basically do it yourself?

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Travis Johnson, Stock Gumshoe
September 14, 2012 9:49 am

I’m not sure where you’re distinguishing between “stock funds” and “mutual funds” — most financial advisors probably focus much more on asset allocation than on the specific investments, you can most easily allocate money to dividend-paying companies by buying a basket of companies yourself or by buying an ETF or a mutual fund.

I can’t give you personal advice, but I can tell you that I have somewhat less than half of my portfolio in indexed or broad mutual funds and the rest in individual securities — largely because I like researching and selecting stocks. And the first question I would ask a financial advisor is, “how do you get paid?” You will get substantially different advice from someone who is paid by commission than from someone who you pay for their time — I usually suggest that people who want advice are often better off talking to a fee-only financial advisor, someone who you pay to help you with asset allocation or fund selection or general financial planning, since that way you know they won’t be putting you into a particular mutual fund just because they get an unusually high commission from that fund.

That’s not to say that more traditional financial advisors who do sell commissioned funds are bad, or that load fund (“loads” are sales charges you pay when you buy a fund through a broker/advisor, often 5-6% or so, of which the person who sells you the fund gets a big chunk) are bad or that these advisors will give you bad advice — just that sometimes their interests aren’t aligned with yours to the same degree so you might have to be particularly careful to find an honest and well-recommended one. Just know how they’re being compensated and ask the right questions accordingly.

And I generally think that unless you particularly enjoy researching stocks or managing your portfolio and want to put a bit of time into it, there’s not a lot of reason to buy individual stocks — it’s a lot more work and it’s quite hard to be better than average, while it’s extremely easy to buy “average” with an array of index funds that costs essentially nothing in management fees.

Just my two cents. I’m sure there are plenty of folks in our community who could provide their opinion as well and I hope they’ll do so.

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👍 16186
September 14, 2012 11:41 am

The first thing to do in hiring a Financial Advisor is to find out all about him ,where he’s been ,what as an advisor is his strong points. Find out his whether he’s just in the business to get a commission, or is he interested in helping his clients. Shop around remember nobody cares about your money like you do .Be diligent

September 15, 2012 11:02 am

Best advise with all the uncertainty of the market, the economies around the world discontent in the Middle East and the drastic different directions the tax laws could take with the toss of a coin election we have coming is Energy MLP’S and silver. IMHO

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