It is into the second quarter of 2010, and the S&P is up nicely year to date.
However, it is estimated that many Americans remain non-invested in the market even though it is reported that savings for the average American family are insufficient for retirement. There is a need to save and invest, and the purpose of this column is to reduce fear of investing by showing how to know your adviser.
Utilizing a qualified professional to help you invest can lower your fear of investing when you have someone who functions as your fiduciary. To help you determine if your adviser is a fiduciary, examine how the adviser is paid when you are in the selection process with whom you work. An adviser you use may be paid by the product into which your savings are put rather than asking for a fee to manage your account or a fee to do planning work.
People normally work to receive income, so that if your adviser is not paid by you, they receive income from the products in which your savings are deposited. Those receiving a lot of income have found ways to mass produce a product sale or service by way of radio, newspaper advertisements and television.
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In investments, it may be someone selling one or two products to many clients over and over again in disregard to peoples’ unique needs and situations.
As product commissions can be high compared to planning fees, unfortunately for the investors, those advisers who better ignore the unique needs and situations of the individual investor can focus on selling to more individuals efficiently. This generates commissionable income for the seller and keeps the investor’s dollars tied to a fixed annuity company product for long periods, and the investor has few options. Often the longer the investment is tied to the fixed annuity company via surrender fees, the higher the commissionable payout to the seller.
You may be far ahead to pay a certified financial planner who is regulated by a board for ethics requirements in their practices. Not only will you receive helpful financial planning ideas applying to various areas of your present position, you will also receive information for different products that serve your needs, permitting you to work with your adviser in a team approach.
You should know as well there are fees with any investment that you make. Examination of the track record for your adviser is important, and talking with other clients of that adviser may serve you as well.
In brokerage accounts, being overly concerned that an adviser does receive a fee keeps you from ever considering benefits the fee provides to you. Unlimited trading can save a few dollars, but it is believed the bigger benefit is that you may receive recommendations from a talented adviser that can potentially add far more to your bottom line then when you ride the market down during a poor economic cycle.
The adviser can reallocate your investments for economic conditions. Historically, the market recovers, and when it does, you may move forward rather than trying to recover that which you lost staying in the same investments riding the market down.For example, if you are not back to where you were September 2008, you are witness to riding the market down, and this affects your returns.
Close to or in retirement, your returns become more and more important to secure your lifestyle throughout this period and/or reach your objectives for your heirs. Further, failing to look at estate planning considerations can send large portions of your savings to the government rather than to your intended heirs. A certified financial planner has undertaken studies in this area.
When you consider that a planner takes time working one-on-one with you, listening to your situation, gathering information, analyzing your position with your goals in mind and considering options better for you while unencumbered by a decision to sell a predetermined high-commissioned product, you pay them to be your fiduciary.
And planners may know about investments as well. They may manage money themselves, or they may know about asset managers they can hire to work for you.
Asset managers who understand many ways to invest, business financial reports, business situations, government and co-operations of governments around the world are people you want to manage your money. A manager’s ability to consistently interpret these effects on companies throughout the world affects your asset growth.
Lea Smith Johnson, a registered investment adviser, can be reached at (941) 755-0975.