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Posts Tagged ‘Financial Advisor’

Despite the ease of trading over the Internet and the publicity given day trading, Americans today are putting eight out of ten of their discretionary investment dollars into meeting long-term goals, according to new research by the Forum for Investor Advice. On average, investors define long-term as being at least 15 years. Just over half of investors surveyed by the Forum (52%) have a relationship with a financial advisor, and those who work with an advisor tend to have a slightly longer definition of long-term.

Women were more likely than men to set conservative goals. For example, while 42% of the men said they planned to use some of their short-term investments to make a major purchase such as a car or house, only 14% of women had such a goal. And, while 42% of women said they plan to use some of the money to finance their children’s or grandchildren’s education, only 29% of men had such a goal.

An attorney recently told me that a rep’s duties to his or her customers (in a non-discretionary account) terminate upon the consummation of the transaction. No wonder, that attorney cited a court opinion from 25 years ago. That court opinion is prehistoric in terms of how the securities industry and the roles of registered representatives (“financial advisors” and “financial consultants”) have evolved.

Consider the rep who does not explain the risks of a particular investment or investment strategy which are unsuitable in light of the customer’s financial capability or investment objectives. Likewise, consider the rep who fails to recommend a hedging strategy (such as a collar) for a customer who is unwilling or unable to sell his or her position. What are the duties of reps in those scenarios? In modern times, Professor Norman Poser states the guiding legal principle in his treatise Broker Dealer Law and Regulation (3rd Edition 2002 Supplement), at page 2-50:
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Asking questions and getting answers is the heart of Step 4. Your financial advisor can assist you in getting information and can provide guidance based on experience and personal knowledge of you and other clients. Remember, the risk/reward tradeoff is yours alone, so how you feel about an investment may be as important as your personal circumstances– especially if you’re already well informed about the investment’s features and the level of return you’ll need to reach your goals.

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We’ve all seen the movies and read the books about the lucky person who suddenly inherits a bucket full of money or wins the lottery. The plot always involves the problems the newly coined millionaire faces with his riches.

But receiving a big cash bonanza isn’t as uncommon as one might think. It can easily happen to you. If you are one of the 76 million baby boomers born between 1946 and 1964 who participates in a 401(k) or other retirement program, you may find yourself with a six-or seven-figure cash settlement upon retirement.
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The key for mutual fund investors is to define and recognize value in professional financial advisor services, and then insist on getting that value. When you pay a sales charge or a fee, what can you expect a financial advisor to do for you? At a minimum, your financial advisor should:

• Understand your needs and help you formulate long-term investment goals and objectives. Before making specific recommendations, your advisor should try to gain a “whole picture” of your past experience, lifestyle and goals, as well your other investments and current financial situation. When will you retire, for example? Do you have life insurance? Do you own real estate? How secure is your job?
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You should select a financial advisor carefully, starting with references from friends and other professionals like your lawyer or accountant. Another method is to talk to the branch manager of a financial services firm about your investment needs and then ask for a recommendation. You may want to interview at least two or three advisors before you make your choice. Briefly, your decision should take into account several factors, including the following:
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Eighteen years ago, right after graduation from dental school, Morris Clark met a Connecticut financial advisor who taught him how to save and invest. “Peter talked about how finances can fit into the rest of your life,” says Clark. “His greatest value was in giving me the information I needed to think intelligently about money and separate emotion from objectivity. I learned to know when I was in over my head, when financial opportunities were more sophisticated than they appeared, and what to look for when examining a new investment choice.”

He showed me there are ways to take risk without jeopardizing my entire financial program” – Morris Clark, D.D.S.

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If you’re new to investing.you may be wondering how to invest properly.There are so many options available, that the choices may seem overwhelming. However, there are some basic principles that can help you make some basic decisions about where your money should go.
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