Maybe you’ve read my last four posts and still aren’t sure you want to tackle investing on your own, or maybe you’ve already got some investments in a managed account somewhere, or maybe you’re already a bazillionaire (in which case, please stop reading this blog and go do something useful), but I’m sure some of you are still thinking that you would rather hire someone else than have to think about all this gobbledygook on your own. You know what? That’s OK. This is a space of no judgments. (Ok, maybe a few, but not on this particular topic…)
But how do you decide who can help you? Sadly, there’s no magic machine that will make money for you.
Your best bet, hands down (apart from doing it yourself, of course), is to hire a fee-only advisor — someone who you pay a flat fee to give you advice. I know this sounds cuckoo given my previous rants about fees, but think of the alternative: if you’re not paying them a fee, how do they make their money?
Yep, they work on commission. Great for them, but big mistake for you.
Many “financial advisors” (which go by many names, including stockbrokers, broker/dealers, advisors, and planners) earn money based on what products they sell you. Seem like a conflict of interest? It is. The crazy part is that this is how the system is designed to work. Disclosures of fees are often limited and confusing, and you the investor are often left thinking that the “advisor” is working in your best interest. They’re not.
Instead, broker/dealers and the like must meet a standard of “suitability” — is the product they’re selling “suitable” for your needs? What that means, I have no idea, nor do they, nor do you. Unlike attorneys, for instance, there is no required “fiduciary” standard that says your stockbroker should recommend investments based on YOUR best interests rather than theirs.