Where’s the Beef Part Two – Ask Yourself the Right
Questions
…You are much more likely to get the results you
desire.
By Jeffrey D. Voudrie, CFP
June 2, 2008 - We all remember those old television
commercials where a little old lady disappointed with the puny hamburger
she just purchased shouts out, “Where’s the beef?” In last week’s
article, we discussed how investors often pay top dollar for below
average results. How can you be sure that you are receiving the service
you are paying for?
(See link to first "Where's the
Beef?" in sidebar.)
The first factor you need to consider is what kind
of financial service do you need? While some people mainly want a
comprehensive financial plan or just help with allocations, most people
really want a professional who can put their money in the right
investments, monitor those investments closely, and make adjustments to
grow and maintain their wealth.
I call this person a money manager. They are the
ones who make the daily decisions about your money. Advisors that sell
products aren’t true money managers, because they are handing off the
daily decisions to someone else. That doesn’t mean all advisors are bad,
just that you aren’t paying them to manage your money.
If all you’re looking for is a way to split your
money between different mutual funds, then you don’t need an advisor.
You can easily get free mutual fund allocations from a number of
sources. Why pay a high commission for something you can do yourself?
Let’s say that you are looking for someone to
invest, monitor and adjust your investments as needed, an actual money
manager. What questions should you ask a potential financial
professional to find out if they can deliver? First, let me tell you
what questions don’t matter as much.
While credentials are important, they don’t prove
that someone is a good money manager. I’ve known people with all sorts
of wonderful initials after their names who only deliver sub-par
performance along with high-cost service. I’ve also known guys with no
college education who, while working out of their garage, consistently
outperform Wall Street pros.
Another question that doesn’t offer a fool-proof
answer is how many years someone has been in business. This can be
helpful, but again, just because someone has been doing this for
decades, doesn’t mean they’re going to do a great job for you.
Neither
does the amount they have under management. As mentioned in last week’s
article, having billions of dollars in assets doesn’t automatically mean
your money will experience superior performance.
Here are the questions you must ask, but almost
none do. Your first question should be what kind of strategy or approach
does he or she have to investing? Are they mainly buy and hold or do
they practice more active trading? Do they mainly use mutual funds? Do
they employ a combination of strategies?
Using those strategies, what kind of performance
results have they actually delivered? Ask them what their worst
investment decision has been, and what steps they took to correct it.
No
matter how brilliant you are, no one hits a home run every time at bat.
A good money manager isn’t one who never makes a mistake, but one who
adjusts properly when they do. Investors between 2000 and 2002 didn’t
lose 30% to 40% because of bad investments, but because of bad
strategies.
Another very important question to ask is what
processes does he or she have in place to reduce loss in the accounts
they manage?
> How often do they monitor your investments and their
performance?
> If another 9/11 strikes and the markets take a major
tumble, what plan do they have in place to deal with it?
> Is any
rebalancing they do automatic, and if so, how often?
Talking to clients actually using a professional’s
service is invaluable. Ask for multiple client references and be
suspicious if you are only given two or three to choose from. Being able
to call or at least email referrals is far more informative than merely
reading a written endorsement. Talk to several and ask them what kind of
gains and losses they have experienced and how quickly their concerns
are addressed.
If you ask the right questions, you’re much more
likely to get the results you desire. Ask about the strategies and
processes a professional has in place and the performance they have
delivered, and you won’t have to be disappointed when you look at your
account statement and ask, “Where’s the beef?”
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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