The income crisis is not going away, and you have to do something to protect your earnings and build wealth. You could choose an investment strategy that includes a mix of stocks, bonds, real estate, commodities, cash and other assets. But if you're like most people, you don't have the time or expertise needed for this type of diversification. Your best bet may be to find a money manager who can handle all these investments on your behalf.
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If you are going to let someone else invest for you, the only way to ensure that they're acting in your best interest is by hiring a fiduciary. A fiduciary must put his client's interests ahead of his own at all times. And he must disclose all conflicts of interest as well as potential fees, taxes and penalties before making recommendations. If you want a financial adviser to act on your behalf, make sure he is a fiduciary.
You should also be aware that brokers who recommend only one kind of product may be violating their duty to serve you with care, loyalty and skill. They should offer a range of investment options, including mutual funds, exchange-traded funds (ETFs), individual stock, bonds, annuities and life insurance. The SEC requires registered representatives to recommend "suitable" investments based upon risk tolerance and goals. But it does not require them to give you information about the benefits and drawbacks of each option.
This is why you need a fiduciary. When choosing a brokerage firm, look for a company that offers a wide variety of investment products and services without charging excessive fees. It's important to ask whether the broker works directly for the firm or if he has been assigned to you by an affiliated third party. In either case, he will have a fiduciary responsibility to you.
Finally, you should never sign anything until you've read it carefully and understood every line. If you're not comfortable reading and understanding a contract, get help from a lawyer, accountant or financial planner who understands securities law.
When you decide to hire a professional, make sure he/she is qualified to do the job. Ask how long the person has been working in the profession; what licenses or certifications he holds; what kind of continuing education he gets; and where he studied. Find out if there have ever been any complaints against him or her.
Good questions for your new financial adviser include:
• Are you a fiduciary?
• What types of investments do you sell?
• Do you work for a brokerage firm, insurance company, bank or some other organization?
• How much do you charge for advisory services?
• Will I pay any additional fees when I buy or sell investments, such as commissions, registration fees, sales charges or surrender fees?
• Do you receive kickbacks from mutual fund companies or insurance companies for selling their products? If so, will you tell me which ones and why you recommend them?
• Have you ever lost money for a client? If so, please explain why.
• What kind of disciplinary actions, if any, have been taken against you by regulators or professional organizations?
• Is there anyone else I can talk to, such as clients, former employers or colleagues, who would be willing to vouch for your work?
It's good to ask lots of questions during this initial meeting. Then go back over your notes, check references and talk to others who've used the adviser. This process will help you determine whether the person is right for you and that he or she has your best interests at heart.