We are now in a New Era of Investing and Money Management

Every day, there are more and more products, services and companies pushing the idea that you should be your own financial advisor. 

Do-it-yourself brokerages like Scottrade, TD Ameritrade and E*Trade lure you to “discover how millions of customers are taking control of their future with one of the most powerful investing and trading machines” (an actual quote from the E*Trade website).

Such marketing tactics – while great for corporate profits – are often dangerous because they make us feel like we should all be managing our own money and investments.

Let’s step back a minute.  Financial advisors and asset managers dedicate their entire careers, and often lives, to managing investments and financial plans for their clients. 

How would you feel if your money was being managed by someone who “moonlights” as a financial advisor, finding time apart from their day job to look after your finances and retirement?

Probably the same way you’d feel if it were suddenly your responsibility to manage all your personal investments, savings, and retirement funds. 

So don’t be fooled by brokerages and research services claiming that you can instantly become your own professional, market-outperforming financial advisor; be realistic about the time, training and especially experience necessary to securely and effectively manage your assets. 

Best wishes in your search to find the right financial advisor for you.

It is recommended to choose 2-3 financial advisors to contact before you select one to work with.  This will allow you to see the various expertise each advisor has and give you choices to base this very important decision on. 

This decision will most likely be one of your major ‘partnering’ decisions in your business life…

We hope you have a great weekend.  The AllFinancialAdvisors.com team.

 
There is an ongoing debate in the securities industry about the extent to which insurance agents are qualified (and should be sought out) to provide investment advice.

Because of products like annuities – which are financial products that accept investors’ money in exchange for securing a steady future (or immediate) cash flow, and are often used for retirement saving – fast-talking insurance agents have been known to blur the lines between financial advisory and insurance.

While annuities can be an excellent addition to any investor’s retirement plan, let’s face it – insurance is a business driven by sales commissions.  Insurance agents are definitely NOT financial advisors. 

Insurance agents will often tout and/or promote the insurance products that charge the highest fees and generate the greatest sales commissions – NOT products that an independent advisor would likely recommended, especially if those financial advisors are bound by a fiduciary duty and are seeking the best interest of their clients.

So when making your retirement decisions, or if you’re considering purchasing an annuity product, we recommend you work with independent financial advisors whose primary goal is to protect and grow your wealth.

While insurance or annuities may be a part of your financial plan or investment portfolio, your finances and retirement planning should not be left to an insurance salesman.

In addition to investment expertise, and ideally objective advice, financial advisors will be able to advise you on the most appropriate insurance or annuity products, and can often provide insight regarding those products that are safest and have the lowest fees.

We also recommend choosing 2-3 financial advisors to interview before selecting one to work with.  This will allow you to see the various expertise each advisor has and give you choices to base this very important decision on.  A decision that will most likely be one of the major ‘partnering’ decisions in your retirement years… 

We hope this helps!  Thanks.  The AllFinancialAdvisors.com team.

Getting Started and Taking a Step Back: Financial Planning

In our world of ubiquitous financial information, it is easy to get caught up in short-term trends when thinking about our money:
* What are the hottest stocks?
* Which mutual fund managers have the best performance this year?
* What is Jim Cramer telling me to sell today?
* What is Suze Orman telling me to do this week?

However, turning your hard-earned cash into more cash is only the tip of the iceberg. 

Knowing how to manage and budget your spending, income and saving is crucial, and in the long run trumps returns of any size.  This is where financial planning comes in. 

Think of stars like M.C. Hammer, Michael Jackson, and Mike Tyson.  Each of these individuals made tens (if not hundreds) of millions of dollars, and had access to high-end investment solutions – yet managed to wind up broke and bankrupt before the middle age of 40.  Why? Because of a lack of financial planning!

Contrary to popular belief, the easiest way to become rich is not to start a company or win the lottery, but instead to start saving from an early age and create a financial plan that maximizes tax efficiency and suits your lifestyle needs.

If you begin saving for retirement at 25, putting away $2,500 per year, you will have an astonishing $700,000 by age 65 (assuming annual growth of 8%).  By contrast, if you put away $2,500 per year, but wait until age 35 to start, you will have only $306,000 by age 65 (assuming the same growth rate). That is the magic of compounding and saving – or as Warren Buffet likes to call it, the “snowball” effect.

So… instead of chasing the latest financial trend, start by choosing a financial planner or a financial advisor who provides this service.

Financial advisors or a financial planner will examine your situation individually, create a customized financial plan, and help you achieve the future you desire.  Financial planners typically charge an hourly or fixed fee for their services; some financial advisors offer financial planning solutions in-house as well. 

Don’t expect this kind of personalized help and service from a mutual fund!

NOTE: Experts recommend contacting 2-3 financial advisors or financial planning firms, in order for an individual to contrast and compare each financial advisor or firm; thus making the best-qualified choice for their unique situation.

AllFinancialAdvisors.com is an online resource of financial advisors, financial planners and wealth managers.  It is a independent 3rd party directory of Registered Investment Advisors (RIAs) managed by FINRA and the SEC (United States Securities and Exchange Commission).

Financial Advisor Accountability and Incentives: Performance-Based Fees

Performance-based fees have always been a staple of the hedge fund industry, providing wealthy investors with the comfort of knowing that their money managers have a personal incentive to outperform the market.

The famous “two-and-twenty” fee structure refers to hedge fund managers taking 2% of assets under management as a base fee, and in addition taking 20% of all returns that exceed or outperform a given benchmark (such as the S&P 500) or a “high water mark”  (the highest net asset value previously seen at the end of the fiscal year). 

Mutual funds and financial advisors, for the most part, do not embrace the performance-based fee structure, and simply take a fixed fee based upon clients’ assets under management [AUM] – meaning they charge the same fee regardless of whether their fund (or investment) tanks or beats the market.

Given the obvious and mutually beneficial value of employing such a fee structure, more and more investors are seeking out financial advisors and investment advisors that offer performance-based fees.

Why shouldn’t ordinary investors be able to invest the way the wealthy do?

After all, there is a certain feeling of injustice in knowing that your financial advisor or money manager is raking in the same amount of fees win or lose. Performance-based fees help ensure that your financial advisor is sharing the profit – and the pain – of the investments they are making on your behalf.

While performance-based fees appeal to all investors seeking a financial advisor, there are currently restrictions on what types of investors can be charged such fees.

Under the Advisers Act of 1940 (the Advisers Act), RIAs (Registered Investment Advisors, which include most financial advisers) can only charge performance-based fees to “Qualified Clients.”

“Qualified Clients” are currently defined (under Rule 205-3) as clients who have assets under management with the RIA of $750,000 or more, and clients who have a net worth of $1.5 million or more.

However, as the demand for performance-based fees increases among investors of all types, we can expect that in the future, performance-based fee investments may become available to a wider range of investors.

We hope this helps.  Let us know. 
Thanks — The All Financial Advisors Team