Where do you get advice?
What are your options to get financial advice? Who do you turn to? What can you expect?
The stock market is a difficult place to navigate — full of speed bumps, roadblocks, steep assents…and sharp declines. However, in the long run, patient, disciplined investors have been rewarded. Over the past five decades $1, has grown into $23.31 adjusted for inflation.
Simple enough, right? Invest consistently, stay patient, and you will end up with healthy gains. But where exactly do you invest to maximize your earnings? Large cap or small cap? What do those terms mean? Domestic or international? Individual bonds or bond funds? Emerging or developed? How much in each?
There are countless sources of investment advice, ranging in cost from free to very expensive, and from extremely valuable to worse than useless. So, where should you go for advice on one of the most important areas of life?
First, you need to figure out your financial goals. Do you want to retire in 15 years? Save to buy a house? Send the kids to college? All of the above? Knowing where you want to go is crucial to picking a navigator.
This list of potential advisors runs from least expensive ($) to most expensive ($$$$). In theory the level of help and depth of advice should increase with each option.
1. MOM and DAD – My favorite. The most important factor for selecting a financial advisor is trust. You need to know that the person offering the advice has YOUR BEST INTEREST at heart. If your parents have demonstrated an ability to handle their money wisely, why not seek their counsel on your finances? $
2. BOOKS – There are thousands of investment advice books out there. How do you decide which ones are worthwhile? Read reviews, ask your friends what they’ve read, skim through a few volumes at the library or bookstore. I recommend The Automatic Millionaire by David Bach and The Little Book of Common Sense Investing by John Bogle, the father of index fund investing. $
3. Vanguard Direct – The Vanguard Mutual Fund Group (found at www.vanguard.com) is the Granddaddy of Index mutual funds and offers more than 100 investment options to choose from. They are known for having the “lowest” of low cost funds in the industry. However, Vanguard offers very little personal advice on “what to buy”, so you’re on your own. One simple solution: The Vanguard Target Date Retirement Funds. If, for example, you plan on retiring in 2030, Vanguard’s Target 2030 fund may be a good one-stop shop. $
4. Your 401k Rep – If your company has a sizable 401k plan, you may have access to one of the plan’s representatives. This person should be at least moderately qualified to help answer what fund or fund combination would be best for your long-term goals. $$
5. Charles Schwab or Fidelity — These are discount brokerage firms. You can go directly to their websites ( www.schwab.com or www.fidelity.com) or drop by a local branch and speak with a financial planning specialist. $$
6. Fee-Only Financial Planners – A fee only planner will charge either an hourly fee, or a percentage fee of the assets managed for you. “Fee-Only” means that the compensation that they receive can ONLY be from you, as opposed to commissions, mutual fund fees, or mark ups on financial products. You should have plenty of face time with these planners, and they should be able to advise you on financial topics (ie. Insurance and mortgage questions) beyond just your investments. $$
7. Full Service Brokerage Firms – The BIG name bank/brokerage firm combinations like Bank of America/Merrill Lynch, Morgan Stanley Smith Barney…These outfits have thousands of brokers/financial advisors who are more than happy to help invest your money for you. The way these advisors are paid can vary greatly. See my article last week for ways to minimize your investment fees. $$$$
Wes Moss is a certified financial planner and is the Chief Investment Strategist at Capital Investment Advisors in Atlanta. Moss is also the host of “Money Matters” on AM 750 and now 95.5 FM News Talk WSB on Sundays from 9 a.m.-11 a.m. An author, “Apprentice” alumni, husband and father, Moss is committed to helping Atlanta’s citizens with financial health.