Do you have money to invest, but you’re not sure where to put it? Most people who are unsure about investments hire someone to help. Here’s how to do that the right way.
One of the greatest danger points is mid-career, when you find yourself with a great deal of money in a 401(k). You’re at the greatest risk because that’s when you’re most likely to end up hiring a commissioned salesperson.
Is that a problem in itself? No. There are plenty of situations when paying a commission is just fine. But in the investment world, there can be inherent conflict of interest with commissions.
ARTICLE: Clark’s Investment Guide
Why you want to use a fee-only financial planner
There are plenty of investment products that may not be the best choice for you, but you may be sold them by a commissioned salesperson because the commissions are just so humongous. For example, variable and index annuities are referred to as ‘sold’, not ‘bought’, since people don’t buy these on their own — they are convinced to do so.
Salespeople use code words such as ‘retirement secured account’ and other phony phrases to keep from tipping you off that you’re being sold an annuity. Sometimes a Life, or Immediate Annuity makes sense, but the commissions are so low you won’t hear much about them.
I want to warn you away from another term: ‘fee-based planners.’ These salespeople start with a fixed fee, but the commissions on products they may sell you defray those initial costs, which again, may not be in your best interest. Honest commissioned salespeople will rise above their personal interests and sell what’s right for you.
The stakes are so high in investing that you should consider fee-only planners. They’ll give you a fixed price up front for their services, regardless of the product they recommend. You won’t have to worry about conflict of interest.
Their success will depend on your good word of mouth and how well they did by you. To find a good one, go to the National Association of Personal Financial Advisers website, NAPFA.org. Another good resource is Garrett Planning Network: GarrettPlanningNetwork.com.