Getting a Financial Consultant - Three More Tips For Finding the Right One

If you're frustrated from having one financial consultant after another financial consultant provide you with inadequate returns on your stock portfolio, then I hope you read my first article "Three Tips for Getting a Superior Financial Consultant." On this page, I'll drill down some more to essentially hammer home those points.

Finding a superior financial consultant, isn't always concerning the financial consultant. It is sometimes also about you. Do you want to also make the commitments to find a superior financial consultant? In this article, I'll discuss one more crucial behavior about financial consultants and two regarding the behavior of you, the investor.

Three more tips:

(1) Don't hold mutual funds;

(2) You shouldn't be stingy if you find a superior advisor; and

(3) Be patient and ask plenty of questions in your search for a superior financial consultant.

ISO agent programs  Hold Mutual Funds

Let me tell you why I'm not a fan of mutual funds. Mutual funds have so many hidden fees that it's often difficult to learn just what your costs are. Besides upfront costs which can be upward of 5% for some funds, you can find 12b-1 advertising , marketing and distribution fees that range between 0.25% to at least one 1.0%, administrative fees that range from 0.20% to 0.40% and of course management fees paid to the mutual fund manager of 0.50% to a lot more than 1.0% annually. This doesn't even include undisclosed "soft" costs of trade commissions that may add another 2.0% to 4.0% in costs. And yes you didn't incorrectly read the first part of that last sentence. Many mutual funds ask you for 12b-1 expenses they incur from advertisements and commercials that urge you to buy their funds, and if you're buying no load funds, chances are that your 12b-1 fees are higher than average.

Increase this, intangible costs like the performance that is sacrificed to maintain the necessary level of liquidity to fulfill share redemption, and your costs become even greater. For a fund that turns over 100% of its assets annually, Roger Edelson of the University of Pennsylvania Wharton School estimated this sacrificed performance to be 1.5% of returns annually. Lastly to include insult to injury, sometimes fund managers sell out of these biggest winners to meet liquidity needs, generating a capital gains tax for you personally, the investor, even if the mutual fund lost money that year.

But this isn't even where in fact the negative traits of mutual funds end. Assuming  ISO agent programs  have one of the many financial consultants that merely make an effort to jump on the hot emerging market bandwagon by buying mutual funds in China, India, or any other country, I help you to exercise extreme care. When pullbacks happen in these country's economies as will inevitably happen, you're at risky of losing money quickly. Why? In a mutual fund, you're susceptible to a herd mentality that more often than not, will induce panic upon the release of bad news, and cause an incredible number of investors to redeem their shares over a short period of time. If this happens, fund prices will plummet before you even knew what hit you.

But if you opt to own just the best stocks in the very best industries in these countries, most likely your stock prices will be a lot more insulated and less volatile in that scenario. While these stocks may still decline, they will most likely decline not nearly as expensive the fund will. Strong companies' stock prices have a tendency to weather country-wide economic downturns superior to fund prices, and when they are in the proper niche, they may even continue to flourish.

Be Willing to Pay Fees for Superior Advice

Superior advice is superior just because a lot of effort and time go into producing that advice. I remember speaking with a potential client one time that had a million dollars in the currency markets and was adamant about not paying fees. He just wished to pay commissions on stock trades. When he showed me his statements (by the way he was with a major Wall Street firm that I will not name), there seemed to be no structure or investment strategy in his portfolio. He owned a mix of mutual funds and individual stocks, and many times those stocks were traded as soon as there is a nominal 5% gain in virtually any of them. Furthermore, the statements by his financial consultants were misleading. The consultant handwrote on his statements that he was doing great because he was up 6% that quarter (that i believe just about matched the S&P 500's performance that quarter). He told me that annualized, that the 6% translated into 24% returns.

But when I explained that his net returns will be lower because his portfolios quarterly 100% turnover rate produced exorbitant capital gains taxes that would undercut his net returns, he didn't seem to understand. I assume his financial consultant didn't bother explaining this small detail to him. Still, he insisted on paying no fees no matter what. I could tell that he was the sort of person that was blindly loyal to his financial consultant, therefore i moved on without wanting to schedule another meeting.

Superior advice costs money. And if your financial consultant is superior, he / she will be transparent about his fees and your costs, so you won't be confused in what your true gains are really. Avoid being stingy. After everything you just learned about mutual funds, why can you not be willing to pay even up to 2% annually for superior individual advice and management when you're almost certain to be paying more than that a year just to own a mutual fund?

Be Patient and Ask Lots of Questions

If you persistently ask the three questions I mentioned in part one of this article, you can find frustrated after speaking with ten financial consultants, none of whom can answer those questions. My advice is to you need to be patient. Don't quit and don't settle for a salesperson that is trained to answer those questions to cause you to believe that she or he has answered your questions when that's not the case at all. What do I mean?

For example, when you begin drilling down about specific stock picks, a standard sales strategy to avoid your query is an answer similar to the following: "I'm not just a stock picker. But don't worry. I know how to find the best money managers in the country to manage your money for you, so you're in great hands." Avoid being misled by smokescreens such as this. Understand that if your financial consultant truly understands where to find you the very best money managers, he then or she must necessarily have discussions about geographical preferences, industry preferences, and specific stocks with those money managers. How do a financial consultant claim to choose the best money managers for you personally but have no understanding of what stocks you possess and what makes those stocks special?

To summarize, buy individual stocks over mutual funds, be willing to pay fees for an exceptional advisory when you are so lucky concerning find one, and remember, the luckiness of finding an exceptional advisor is not actually luckiness at all. It originates from your hard work, tough questions, and your unwillingness to be led astray by the professional smoke screens of financial consultants.

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