Thoughts and observations for those investing on their own or contemplating doing it themselves.
If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.
Monday, April 22, 2013
Ask Your Investment Advisor How He or She is Compensated
But then I switched to managing money for individuals and was given a checklist with all kinds of questions to ask about people's financial situation. The questions were pretty standard - about how much people made and how much debt they had, etc. I mentioned in passing, to the president of the company, that I felt awkward asking these kinds of questions. His response: "Why?"
Asking these questions, of course, comes with the territory of being an advisor; and I quickly got over my awkwardness.
Still, I think today that clients should flip all of this around and really pin their advisor to the mat on how they are being compensated. In other words, they should find out exactly what their advisor is making off of them. Believe it or not, it is now the law that qualified plan (i.e., 401(k)s,403 (b)s, etc.) fund providers have to spell out the costs to participants of the plans they are investing in--down to the level of individual mutual funds as well as account maintenance.
All of this is brought up by an excellent article, "How Financial Advisers Get Paid," by Jim Blankenship. The article nicely spells out the difference between fee-based and commission-based compensation. In fact, the article can be an excellent lead-in to asking the question on compensation. The next time you see your advisor, just mention you've read a recent article on the subject and it led you to wondering about his or her compensation.
Posted by Robert Wasilewski at 8:35 AM
Labels: advisor compensation, DIY investing
Subscribe to: Post Comments (Atom)
I like the creative DIYReplyDelete