2 Keys to Determine the Value of Advice
In last week’s blog, we began looking into why so many people understandably distrust the financial services industry. Consumers can’t make an informed value determination because they don’t know how much they’re paying for financial advice or products. So what is a consumer to do? Hold tight to these simple keys: communication and education.
If you want to know the fees, commission, and expenses you are currently paying or would pay, your most powerful tool is to ask your advisor. Be sure to watch the advisor’s reaction when you ask about expenses. Does he confidently look you in the eye and maintain calm composure? Does he give you a clear and understandable answer? He should, because as much as fees and expenses mean to a family’s long term financial well-being, the advisor should know the answer to the question and clearly communicate the information to you. Be ready to ask the question about fees and expenses more than once. And if you still aren’t sure you are getting all the information, just sit silently as you consider the advisor’s answers. Silence is a powerful tool you can use to get more useful information, or a commitment from the advisor they will work to get you better answers. Still not confident you’re getting all the information you seek? Ask your advisor’s competitors. Call up a competing financial advisor, tell them exactly what you are doing, and ask them to help you figure out all of your fees and expenses. Why would competing advisors help you for free? They see an opportunity for new business if they can show you they could provide more value than your current situation. Still, these solutions still put you at the mercy of the information the advisors know or are willing to disclose. That’s why you need a second key…
Everyone has their own agenda as they publish information, so it’s vital to gather information from multiple sources, not just your advisor. Good news: quality information is more accessible than ever before. But always seek to understand who is giving you information and their motives. Where would I start if I were you? I would head to my local library and spend one hour in the 332 section. Published books are more likely to give you solid information and less likely to lead you down obscure paths, as is prone to happen with Google searches. But be sure to tune in to the next blog post when we’ll go over the primary investment expenses that could be weighing your assets down. Two simple keys: communication and education. Those can completely alter the course of your family’s financial plan. Even if you met your advisor at church (or especially if you met your advisor at church), you have to be willing to drill him on commissions, fees and expenses. Don’t be afraid to ask, it could literally be a million dollar question. And educate yourself. You don’t have to become an expert, but a basic understanding of the financial fees playing field will empower you. It’s worth your time. Avoid financial pain by knowing what you’re paying.