What I’ve Been Up To

Wednesday Welcome: Finding an Investment Advisor You Can Trust

This week we welcome Steven Lockshin, a frequent source in Jean’s reporting and the author of a new book, Get Wise to Your Advisor: How to Reach Your Investment Goals Without Getting Ripped Off. We receive a lot of questions about how to find a financial planner or investment advisor you can trust, so I know Steven’s advice will be helpful.

Investing is much easier than many investors fear it may be. However, like dieting, where we often may know what to eat but do not have the discipline to eat properly; investors often get carried away and make less than optimal decisions. And, with so many different ways to access investments — from stocks to bonds to ETFs, mutual funds, and a myriad of packaged combinations of these vehicles — it’s no wonder many investors hire an advisor or broker to help them sort through these decisions.

You can imagine how important it is to choose the right advisor, but that decision may prove equally as challenging as figuring out what to do on your own. There are almost as many choices in types of advisors as there are types of investments. There are brokers, insurance salesmen who sell investments, independent advisors (Registered Investment Advisors), banks, financial planners, and the list goes on. So, how do you find an individual or company to help you sort through this maze and avoid being sold a bill of goods from a seasoned salesperson, rather than a qualified advisor?

You Don’t Know What You Don’t Know. With so many different types of products and difficult to understand fees, simplicity is often the key. Be aware that complexity breeds risk for you. Simple solutions, including target date or asset allocation funds, do much of the work for you and without emotion. There are also online solutions like Betterment.com or Wealthfront.com that automate investing and savings for you at a fraction of the cost of retail advisors – and do it quite well!

Find a Fiduciary. The word “fiduciary” may not mean a lot to most investors, but it is an essential term that you should rely upon. In simple terms it means find an advisor who:

1. Has no economic conflicts of interest. You can find this out by asking one simple question, “Do you make commissions on my account or do you make more by selling me one solution/product over another solution/product?” If the answer is yes, you need to ask additional questions or consider finding someone who can answer this question with a firm “no.” Chapter 8 of Get Wise to Your Advisor has an entire checklist of questions for your current or future advisor – with an answer key!
2. Has the skills and qualifications to serve your needs. Check their history through the FINRA or the SEC website and ask questions to understand their level of education and experience in the financial services industry. You’ll be surprised to know that there are almost zero education requirements to become a financial advisor.

Understand Your Costs and Don’t Over-Pay. Good financial advice can be had for as little as 0.15% (that’s $150 per $100,000 invested) per year of your assets under advisement and shouldn’t exceed 1.0%. Make sure you understand what you’re paying. Trust, but verify. The industry is riddled with conflicts of interest, buried fees, and unnecessary complexity. However, by asking a few questions and doing just a bit of homework, you can find a true fiduciary advisor who will take care of your savings and investing needs while you take care of your family and your career.

About Steven: Steven D. Lockshin is the founder and former CEO of Convergent Wealth Advisors and author of Get Wise to Your Advisor — his effort to educate consumers on how to identify a proper advisor. Lockshin advises some of the world’s wealthiest families, professional athletes, and Hollywood “A-listers.” He has been ranked repeatedly as one of the top advisors in the nation by Barron’s magazine. Lockshin is an advocate for consumers when it comes to affording them the highest possible standard of care from investment brokers and advisors.