Why an Investment Advisor?

hese are confusing times in the market. You turn on the TV and you’re told the end of the world is just around the corner. You read the newspaper and your worst fears are confirmed, the stock market is going to zero. There are stock market pundits, naysayers, eternal optimists and pessimists. Friends and family members provide you with “tips.” Where does one turn not only in tumultuous times, but during rational markets. You have worked hard, dutifully saved; collected a plethora of investments in various types of accounts. Now what?? You need help! My advice, seek a professional that can guide you through the investment jungle. A no nonsense firm, that has your best interests at heart, no products to sell and values your relationship. Hire an investment advisor.

Now that we have established the need for help, let’s distinguish between an investment advisor and a broker. No, they are not one in the same. An investment advisor has a fiduciary responsibility to his client, a broker does not. An investment advisor typically has a deeper knowledge of the investment arena, earning designations like Certified Financial Planner® (CFP) or Chartered Financial Analyst (CFA). A broker on the other hand, is skilled in sales and is focused on generating commissions and placing your funds in investments that benefit their brokerages bottom line. Unfortunately, their compensation structure relies on commissions or fat wrap agreements (flat rate quarterly charges for unlimited trades). “In general, under U.S. law, investment advisors owe their clients an ongoing fiduciary duty to provide full and complete disclosure of all fees, conflicts of interest, and if so authorized, to exercise discretion in selecting investments with only their clients' best interests in mind.” (1)

Ok, your interest is piqued. The light is on. Tell me again how an investment advisor can help? I’ve got your full attention and I’m ready to deliver the nugget. A good advisor understands the challenges that you face and will take the time to listen and understand your unique circumstances and goals. He is there to assimilate this information and place you on the right path. Remember that a fee-only investment advisor sits on the same side of the table as you. His fee is based on the market value of your portfolio, not on trading activity, products sold, etc. Being more of a partnership, you mutually benefit from the growth of your account and vice versa. Please visit http://www.sec.gov/investor/pubs/invadvisers.htm to learn more about choosing an investment advisor.

It is time to take action. If you have legal problems, you hire an attorney. When your taxes become complicated, you hire a CPA. When the car breaks down, you go to a mechanic. Why should this be any different with your investments? Your money is serious business. You have financial goals, income needs and retirement to address. Why trust investing to a novice like yourself? Hire an investment advisor.

Russ Floyd, CFA
2008

(1) Wikipedia