Jul 7, 2009
Just a few years ago, a “financial planner” has one of the best jobs in the United States. They get a very satisfying work with high compensation. Unfortunately, this isn’t the case today. Post-Madoff and Post-bailouts, a lot of financial advisors are under scrutiny. And they are having the most miserable time of their lives. In order to prove their integrity and justify their rates, they are working harder than ever before. The industry said that changes are being made. The financial planner in the future will operate differently to adjust to the needs of their clients.
Now, the main question for investors these days is: Should you fire your financial advisor? Are they still worth paying for?
The truth is the question is more complex than that. It is not a good idea to dump a good advisor simply because your accounts are valued less compared to two years ago. The steep decline in interest yields in pretty uniform across the board. Instead, there are other methods to determine if your financial advisor is still worth paying for:
Calculate the Numbers – the bottom line is the bottom line. Determine the returns you earned for your money and compare it to what you could have earned if you invested it yourself. The point is, a financial adviser is paid based on what he can do. That means, he should earn more money than what he is being paid for you. In downturns where losses are almost inevitably, he should lose less. It would be a good idea to calculate your earnings in the last three years.
Analyze the Adviser’s Attitude – when the worst of the meltdown was at hand and you were losing tons of money, how accessible was your adviser? Did he admit to the extent of the damage immediately? Were you being assured and given advice for the future? Were the events in the market explained clearly to you? They are paid to do this. If they fail on these tasks, then it is a bad sign they can’t handle pressures.
Know your Priority Status – your priority level varies depending on the type of adviser you select, whether it is simply a broker or an independent fee-only planner. Some brokers might recommend certain investment for their own benefit because of conflict of interest. If you encounter this type of broker, consider switching.
Many investors have established good relationships with their planners through the years. Ultimately, it is up to you to determine if you can afford it and if you want to continue using their services.
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