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Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about finding help with your finances; specifically, how to find the best possible financial adviser. Since I spent about a decade as a financial adviser myself, and have been managing my own money for more than 40 years, this one is right up my alley.
Watch the following video and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said. You also can learn how to send in a question of your own below.
For more information on this topic, check out “How to Choose the Perfect Financial Adviser” and “Ask Stacy: Do I Need a Financial Adviser, or Can I Manage My Money Myself?” You can also go to the search at the top of this page, put in the words “financial adviser” and find plenty of information on just about everything relating to this topic.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, everyone, and welcome to your money Q&A question of the day. I’m your host, Stacy Johnson, and this answer is brought to you by the Microsoft Edge browser. It’s the faster, safer way to get things done on the web. Use it: I do.
Today’s question comes to us from Victoria:
“How do you find a fiduciary financial adviser when you only have $100,000 to $300,000 to invest? I’m not finding any that will handle under $500,000. Is there another type of adviser that will look out for the small investor and not their own interest?”
This is a good question for me, because I spent 10 years working for three different Wall Street firms.
Let’s define a couple of terms, so you guys can pick up what Victoria’s putting down. She’s asking about a fiduciary financial adviser. A fiduciary is someone who is required to put your financial interests ahead of their own.
Now, you might think, “Well, what financial adviser wouldn’t be doing that? If you’re paying someone for financial advice, wouldn’t they put you ahead of themselves?” You’d think so. Unfortunately, in the bizarro world in which we live, that’s not often the case. Let me give you an example:
Suppose I’m your investment adviser. You come to me and you say, “Stacy, I want to put $10,000 in a stock mutual fund.” Now, suppose I’ve got two choices. I could put you in Fund A, where you’re going to pay me a $1,000 commission and only have $9,000 of your $10,000 go to work for you. Or, I can put you in Fund B, where you’re only going to pay $100 in commissions and have $9,900 of your investment going to go to work.
The way the rules are today, commission-based advisers can put you in the fund that charges the $1,000 commission. Why? Because it’s “suitable.” You asked for a stock mutual fund; I’m giving you one. Suitability: That’s the requirement.
Now, suppose I’m a fiduciary. I’m required to put your interests ahead of my own. I have to recommend the fund with the lowest commission, because that’s obviously in your best interests.
That’s the difference between a fiduciary and most of the advisers today. That’s why Victoria wants a fiduciary. Unfortunately, she can’t find one. Let’s explore some alternatives.
First, if you’re looking for professional financial advice, ask questions. Sure, you can ask each potential adviser whether he or she is a fiduciary. But whether they are or not, ask this: “How do you get paid?” If they say they get paid on commissions, be very careful. In fact, I’d avoid any adviser who gets paid on commissions, because of the example I just gave you.
Would you buy a car based on advice from a car salesman? No, because you know they’re motivated by earning a commission. Same with investment advisers. Avoid any commissioned based salespeople, no matter where they work.
In an ideal world, I’d prefer you pay for your financial advice by the hour, just like you would with a lawyer, doctor or CPA. I’d avoid anyone who’s charging commissions.
Another question to ask: “What’s your experience?” If they’ve been around for 30 years and have a giant client list, that’s obviously better than someone who’s been around for 15 minutes. Do they have a degree in finance? Do they have any designations, like a Certified Financial Planner (CFP)? Are they members of any professional organizations? While these things aren’t everything, they at least demonstrate an interest in what they’re doing.
A place to get referrals, and maybe even advice, is from your local accountant. If someone does your taxes, it’s likely — although not guaranteed — they understand investments as well. You might be able to get investment advice, charged by the hour, from your local accountant. Or, he or she might be able to refer you.
Another idea for referrals: Ask your friends, at least those in the same basic financial situation you’re in.
Final advice? Do what I’ve always done: educate yourself.
Contrary to what Wall Street might want you to believe, investing isn’t rocket science. You can do some reading — on our site and others — that will help you manage your own investments. The best idea, in my opinion, is to do that.
Victoria, I hope that helps answer your question. Now let’s close with our quote of the day. It’s from Craig Ferguson, comedian and TV host.
“Divorce lawyers stoke anger and fear in their clients knowing that as long as the conflicts remain unresolved, the revenue stream will keep flowing.”
Have a super-profitable day and meet me right here next time!
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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Localpizzadeliverywalledlakemi.info in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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