About the author: Carolyn Castleberry writes books for Simon & Schuster and Random House on money and time management, with a unique measure of faith added to the equation. Find out more at www.carolyncastleberry.com
Before you solicit free investment advice from your hairdresser’s bookkeeper or your cousin’s neighbor’s insurance agent, do your homework. Think of your investment strategy as a relay race. You go as far as you can and then hand the baton to someone who can take over where you left off. The smart investor surrounds herself with a team of advisers who are professionals in their respective fields — stocks, mutual funds, real estate, finances, tax laws, and more. Unless you’ve got degrees in law, business, and accounting, and you’re a licensed stockbroker and real estate agent, you’re going to have to rely on the knowledge and skills of others in order to avoid costly errors. Here are three tips to get you started:
1. Save Hundreds of Dollars by Refusing to Pay Avoidable Fees.
One of the most important things in saving money is to find out exactly how people are charging you. For example, with a financial planner or investment adviser, the payment might be a percentage of the value of the assets he manages for you. Or it might be an hourly rate or a fixed fee. With any payment arrangement, particularly fixed fees, be certain you understand what’s included for the price. Ask your consultant to alert you when you ask for a service that will involve an additional fee or commission. And don’t be afraid to ask for a detailed explanation of charges in advance. Doing this will save you hundreds, possibly thousands of dollars.
2. Watch for Conflicts of Interest
Also be aware of potential conflicts of interests in dealing with financial “experts”. Ask the consultant who else benefits from the advice he provides you. For example, does he receive referral rewards if you use a certain company? Who benefits when you purchase insurance or securities? It’s also fair to ask for the approximate percentage or premium the consultant receives when you purchase financial products. Be clear about potential conflicts of interest, and ask for a written disclosure of any relationships connected to your plan and its execution.
3. Keep Asking Questions about Your Money!
In choosing a stock broker – asking these questions will save you big bucks. How is the broker paid? First of all, you pay the broker a commission on the trades (purchases and sales) she makes for you. She also may charge fees for transferring assets, closing an account, wire transfers, inactive accounts, not maintaining a minimum balance, and IRA custodian fees. Ask your broker about her fee schedule before you start racking up excess – and avoidable – charges. If you don’t understand what this person is saying, keep asking until you do… or move on.
