Registered investment advisor
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When looking for a good investment advisor you have to check if he is indeed a qualified professional to help you manage your wealth. You have to check if he is a registered investment advisor and if he is affiliated with any association that would make him a lot more credible for the job. You have to make sure he has passed all the necessary qualifying examinations for a registered investment advisor just so you would be able to guarantee that he knows how investments work.
Other than the technical requirements, it would also greatly help you to know if you are looking at the right investment advisor if you are able to do researches about him online. Advisors who are up to date with everything is a good choice because he would know exactly what kind of investment would give you a reasonable profit and he knows how to evolve with the way things are in our current economic status.
Another very good way of finding out if the advisor you are looking at is a good choice as an investment advisor for your newly acquired wealth is by asking around especially those people who have had investment experiences with him. You can tell based on other people’s stories if he is the right person to trust or you would be better of looking for someone else. Advisors who have been proven by time and experience are usually a lot better choice than those who are new in the business and would just make your investment a training ground. You would definitely not want to risk your wealth on them.
Although some people find it convenient to pay for investment advisors who are at a fixed-rate service fee because they are able to budget their money accordingly, it would still be best if you hire an investment advisor that works on a commission based service fee. The pat that you will need to give them would be a percentage of what profit you will be getting from the investment they are helping you with. This way, the investment advisor you will be hiring will be driven to do the best for your investment because it will also earn them a bigger amount of money at the end of the day.
You did not acquire your wealth as quickly as losing it in a few days just because of wrong investment handling so you definitely should not risk it for the wrong advisor.
A registered investment advisor could either be a firm or an individual who is registered to the Securities and Exchange Commission. However you decide to invest your wealth and no matter how much wealth you give an investment, you are guaranteed that your registered investment advisor is taking good care of it. You are guaranteed that he does everything accordingly and legally because he would not want to do anything that would stain his name or the firm that he is associated with or be taken off the Securities and Exchange Commission’s list.
A registered investment advisor is also a lot better to trust with your wealth primarily because they would not be able to register with the Securities and Exchange Commission if they have not passed all examination requirements that would prove their intellectual capacity to handle an advisor’s tasks. You will be able to get the guarantee that he is licensed and he knows what he is doing.
Although we would definitely not want it to happen, but just in case your advisor turns against you, it would be a lot easier for you to chase him down. A registered investment advisor’s important details are definitely with the Securities and Exchange Commission and there is no way that he can run away from you.
Making an investment can be a make or break decision. Handling a significantly huge amount of wealth can be brain racking. Although we may be intelligent enough to plan things, we would still be in need of capable and knowledgeable people to help us put those plans into action. Any huge investment is not going to survive with just one man.
You probably worked hard to earn your wealth and you definitely would not want to lose it just because you were too thrifty to consider hiring a registered investment advisor. If it is for something you have worked so hard for, you should guarantee security and one way to do it with an investment is to find someone you can hold liable-a registered investment advisor.
I want to give you an idea of the type of money that changes hands between fund family companies and financial advisors. Fund companies spend billions of dollars on financial advisors in the form of straight pay outs, fees, commissions, entertainment, trips, 12B-1 fees, direct brokerage fees, pay-to-play fees and supermarket funds fees. These companies would not spend billions of dollars if it weren’t effective.
Financial advisors take these payments because it’s just how most of them make a living in this industry. Financial advisors aren’t dummies; they sell what pays the most, and not necessarily what is best for their client.
I am going to give an example of a financial advising company, just to show this point. There are many publicly traded financial advising companies. You shouldn’t work with any of them, just like you should only buy actively managed mutual funds. The exemplar company is called Edward Jones. They sell mutual funds to their investors. They’re not publicly traded, so they rank OK on that score. But the same forces are at work, and the general partners who are senior investment reps and other owners of the company take the place of the stockholders in a publicly traded company. Most people know them as financial planners or financial advisors. But what they may not know about this company is that they have a preferred list of the fund families that they promote. To be on that preferred list, the fund families have to pay dearly in fees and commissions.
When their employees go through training, they’re only introduced to these seven preferred mutual fund groups. This company even goes so far as to discourage their employees from contacting other fund companies from outside the preferred list. In fact, employee bonuses are linked to the selling of the preferred list.
In 2004, this firm got caught, along with other financial investment companies. They had collected $300 million in secret payments. And 95 % of the time, they sold mutual funds on their preferred list. Because the company didn’t disclose relationships with the preferred list, they had to pay upwards of $75 million in fines to reimburse investors. However, they got paid much more than what was given back to their investors. To put this in perspective, in 2005 alone, after the settlement of $75 million, Edward Jones received $172 million in revenue sharing fees from their preferred seven fund families. That was one-third of their pretax income. A third of their income comes from these fees.
That isn’t objective or unbiased. It’s not proper behavior for a fiduciary. All these years after the litigation, on their website they state, “We focus on the individual investor, not big corporations.” In fact, this seems even worse, because their reps are right there in the communities they sell to. Even with these small offices based in local communities, profits were more important than their clients, which would demonstrate that the focus is on their owners and on profitability.
If you’re planning to work with a financial planner, work with one who does not work for a publicly traded company – or a company that acts like one – because there’s less likelihood of getting unbiased, objective advice. Also important to know is the kind of research that financial advisors do, because it, too, is presented as objective evidence that will make you more money. But for whom does this really make more money?
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