Finding an advisor and trusting those in the world of finance
By Dian Vujovich
The toughest question I’m ever asked is this: Who would you recommend as a financial adviser for me? It’s a question that’s nearly impossible to answer because there are so many variables. The primary ones center on your expectations and then the amount of money you have to invest.
It’s knowing that no two of us are alike when it comes to income, the amount of money we’d like to place with an advisor and our expectations that make this question so difficult to answer. As for accurately matching up an investor’s financial personality up with that of an investment pro, having a hotline to Edgar Cayce would help a lot.
Sidestepping the Cayce connection, knowing the kinds of investment returns you expect over the short- and the long-term is paramount. Keeping those expectations realistic is as well.
While no one knows if or when we’ll ever see decades of annual average returns of 10 percent again, add in the tax consequences of your returns and the bottom line with respect to how-much-did-I-really-make gets murkier.
A quick look at how the average U.S. equity fund has performed over the past few years shows how fast things can change—sans any tax consequences. For instance, over the past five years, ending Sept. 27, 2012, the average U.S. equity fund’s total return was less than 1 percent—even less than a quarter of 1 percent– and stood at 0.21 percent, according to Lipper.
Over the past three years, the average total return on U.S. equity funds was 11.16 percent. Over the past two years, 12.12 percent. Over the past 52 weeks, 22.75 percent. And year-to-date, 13.34 percent.
Just as future returns are close to impossible to figure, there’s also little consensus about who’s advice we most trust within the financial arena.
Earlier this week the results for The Center for Audit Quality (CAO) sixth annual Main Street Investor Survey were released. In a telephone survey of over 1000 investors, 36 percent of those questioned had portfolios valued between $10,000 and $99,000; 41 percent worth more than $100,000; and 31 percent portfolios valued of more than $150,000.
When asked about the amount of confidence they (investors) put in those who are supposed to look out for their money, independent auditors got the highest rating of 70 percent. Financial advisors came in second place at 66 percent, followed by independent audit committees of publicly-traded companies, 65 percent, and financial analysts at 63 percent.
Those garnering less than a 50 percent approval/trust ranking included the corporate managements of publicly-trade companies, 48 percent; corporate boards of directors, 46 percent; and government regulators, 39 percent. Clearly this group was not into trusting the words of corporate bigwigs or the feds.
Back to that recommending an advisor question. When it comes right down to it, the best way to find an advisor or investment professional to work with is to interview a few of them. Then, hope for good luck (luck is really important when it comes to making money—just as timing is) and select one or two to work with. If your choice(s) doesn’t work out, find another. There certainly is no shortage of investment pros to select from.
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