Hire a competent financial adviser


Step 3. Why you shouldn’t hire a financial adviser simply baed on trust


t has always been easier to lose money than to make it and keep it.  According to the Utah Division of Securities, during 2007 alone, they filed enforcement action on 63 cases. Within those cases, 727 investors lost more than $77 million.

Managing your own investments can be done successfully, but it is not easy.  First, it requires a commitment of time researching and tracking your investments. Second, it requires discipline to stick with your strategy through challenging times. Third, and most difficult, it requires you to remove emotion from your investment process.

Most successful people recognize the need for a relationship with an accountant and lawyer. Many haven’t yet discovered the benefits of working with a financial adviser. Based on the number of investment options and the variety of people who call themselves financial advisers, it is easy to understand why. Often figuring out who to work with is so confusing that people give up and opt to manage their money themselves.

Studies have shown that most investors would be better off with the help of a financial adviser. Unfortunately, finding the right adviser is much more difficult than most people realize. Most investors hire someone they trust. However, “trust” is very intangible and difficult to quantify. Also, contrary to popular belief, the size of the firm or familiarity of the brand name does not indicate the quality of the advice provided.

Part of the problem is that titles for financial sales reps are completely unregulated. This means brokers, annuity salesmen and insurance agents are all free to call themselves advisers, financial consultants, financial planners or whatever else they prefer.

To make sure you don’t get stuck with a salesperson when you are looking for an adviser, ask these five questions:


Fiduciary? Fiduciary advisers have a legal obligation to put your interests ahead of their own. Sales reps selling insurance, mutual funds or other financial products are most likely not fiduciaries. A minority of financial advisers meet the fiduciary requirement. Registered Investment Advisors and Investment Advisor Representatives are fiduciaries.


Experience? How many years have they been managing money? Markets are difficult to navigate and constantly changing. Ideally, your adviser should have experience investing in both good markets and bad markets.


Track record? Legitimate advisers will be able to show you what they’ve done for their clients over the years. Showing you the track record of a mutual fund, a hypothetical model, or anything else that they have recently started selling does not count. They need to show you their own track record, which would be a composite of the results of their previous clients’ investments. Any adviser who refuses to show you at least a five-year track record should be crossed off your list.


Conflict of interest? Many commission-based salespeople are honest individuals. However, in the financial services industry, the worse the product the higher the commission. The easiest way to avoid “bad products” and to eliminate potential conflicts of interest is to avoid salespeople who receive commissions. By working only with advisers who are paid through management fees you can make sure their interests are aligned with yours.


Surrender charge? If there is a surrender charge, there was a commission. If there is a commission then you are not dealing with a fiduciary adviser. You should be free to move your money out of an investment if you are dissatisfied. This means you should never own a product with a surrender charge.


Implementing these tips will help you keep your money and find a great adviser.

Building wealth is possible — if you follow the rules.


Steps to Building Wealth

Step 1: 

Start now. 

Step 2: 

Spend less than you earn

Step 3: 

Hire a competent financial adviser


About the Author

Dave Young, president of Paragon Wealth Management, has been managing money since 1986. He was his first client after he sold his 12 franchise businesses and couldn’t find a traditional brokerage firm to meet his needs. From his personal investment experience, he knew there was a better option to managing money. Later that year, he started his own money management firm, and has been managing money ever since.

He received the Small Business of the Year Award from the Provo-Orem Chamber of Commerce and the Best of State Award in Financial Services in May 2008. He is originally from New Mexico. He enjoys spending time with his family, the outdoors, hunting, fishing, camping, sports and exercising.


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