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Managing your Money Manager

Recently, I was pleasantly surprised to receive this in my inbox, forwarded by a client.

The article addressed choosing a financial adviser based on a fiduciary standard and appeared in the AARP bulletin.

It also contained a phrase I have never heard but like. “Me-first” investment advice:

“How do you know if your financial adviser has your best interests at heart? They all say they do. Then some of them turn around and sell you products with high (often hidden) costs that line their pockets at your expense. The government estimates that individual retirement accounts alone lose $17 billion a year to “me-first” investment advice from salespeople who wring large commissions and fees from their trusting clients. That’s money that could have been used to brighten your life.”

Here are the author’s suggestions for working with your adviser:

  • Ask the person managing, or offering to manage, your investments to state in writing that he or she will act as a fiduciary at all times, for retirement and nonretirement accounts.
  • Ask the adviser to compare the costs and benefits of leaving your retirement money in your 401(k) versus investing it through the firm’s IRA.
  • Consider choosing an adviser who charges flat fees — such as a percentage of managed assets or a fixed amount per year — rather than those who also take commissions.
  • Do not be blinded by titles like “financial adviser” or “wealth manager.”

This is a good list but I have to add to it:

  • Ask for the credentials of the entire team. For planning professionals, a CFP® designation is important. For investment professionals, look for a CFA. Be wary of other letters; FINRA lists 174 different designations available to advisers. Most of them are just alphabet soup.
  • Ask for the experience of the team, especially the people choosing investments.
  • Make sure they have a process. Processes can be measured and tested.
  • Ask specifically about other “conflicts of interest.”

Notice I did not mention rates of return or investments (apart from “look for experience”). The best advisers in the world still do not control the stock market. Neither can you. As a consumer, the variable that you DO control is choosing to work with someone that will put your interests first. 


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