Choosing a Financial Advisor

When you go to a professional you may be asking for investment advice, quite a lot of the time you’ll be told about mutual funds. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities (stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals).

Everyone has their own personal opinion on mutual funds so I’ll save mine for another day. If you decide to invest in a mutual fund you may be facing some charges. The first charge you are potentially going to be facing is a “Load”; this is a figure which will be charged to you by your professional. This load can vary but let’s use 5.75% as a benchmark. For every $10,000 you’re looking to invest with your financial advisor they will subtract $575 before it even goes to market, not a small amount eh?

Don’t get me wrong, you’ve gone to the professional for help so you’re expected to pay for it. If you get a pedicure you can’t just walk out without paying right? So the charge may be justified in some people’s eyes. The only problem is studies show that funds chosen by financial advisors perform worse than those chosen by semi-financially-savvy consumers. Not only are you making more money right away for the interest made on the $575 but financial advisors often choose funds which pay higher commissions, as opposed to the best performing vehicles.

The best advice I can give if you are not comfortable investing on your own is to go and see a financial advisor and note down exactly what it is they tell you. Come back onto the internet and look into the specific options they have, see if you can find out what the fees are, see if you can check previous performances of this fund and most importantly check if there are better options. If you do find a better option, or the information they gave you was junk go and see another financial advisor and tell them of your experiences. The financial advisors will give you much more respect if you follow this process.

Read a more comphensive version of this article at Canada Finance

Category: Personal Finance Tips