There’s a lot of “noise” in the investment world…options you would never consider. Eventually, though, something may catch your attention. If you’re like most of us, you’re responsible for your financial self, a job no one can take lightly. So how do you sort out worthy investment ideas from investment duds? What are you listening for amidst all the buzz? It may be easier to clarify what you don’t want.
Three Red Flags When Talking to Potential Advisors
- Avoid One-Size-Fits-All Solutions. If you’ve already received a sales pitch and investment solution before the advisor knows anything about you, this is a one size fits all solution. The advisor may sound like he or she has a can’t-lose proposition. Think about it…they’re well practiced because they only suggest one to every new potential client they encounter. To truly understand you and your needs, I believe that an advisor needs to spend a lot of time getting to know you – advice should be created for you, not applied to you in a cookie-cutter approach.
- Don’t Lock Everything Up & Throw Away the Key. Diversification is one of the fundamentals of investing. If you start to receive advice suggesting that all of your liquid investments should be locked up in investment products with high restrictions and long surrender periods, you probably want to think again. There may be value in insuring a portion of your portfolio, but that doesn’t mean you should lock up your emergency fund or all of your taxable assets.
- Steer Clear of Investment Strategies Based Upon Fear Alone. Many investors experience anxiety when making investment decisions. A good advisor can listen to fears and frustrations and help to understand and plan for those worries. If you are being offered investment strategies simply based upon doom, gloom, and fear, you may want to think again. The glass is never completely half empty and a more moderated approach to investment advice may serve you better.
When investing, it’s best to put your investment needs in context with your overarching financial goals. This is where the financial planning process comes into play. Enduring investment strategies are rarely constructed of a single silver bullet, but those silver bullets make up much of the investment “noise” you hear about every day. Often looking for a more complex, nuanced, and flexible approach will best address your long-term needs. So, when you begin by identifying what you don’t need from your advisor, you are taking a significant step toward finding someone who will help you reach your goals.
Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2011 and 2012, Melissa was honored by Financial Advisor magazine in the inaugural Research All Star List. In addition to her frequent contributions to Money Centered blogs, she writes frequent investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.
Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James. Diversification does not ensure a profit or guarantee against a loss. Investing involves risk and you may incur a profit or loss regardless of strategy selected.