Good Financial Advice For Those Of Modest Means
'The rich get richer and the poor get poorer.' We've all heard that at least a time or two
. One reason for that saying's popularity is due to the presumption that wealthier people get all kinds of great financial advice on how to make their dollars multiply. It just makes sense that anyone worth a million automatically gets a lot of attention from advisers on investments.
If your nest egg is of modest size, however, it used to be that you were stuck with your own ingenuity. The reason was simple. Advisers commonly based their charges on a percentage of the amount being managed. When the amount was small, the advisers' interest in it faded. But let's say your nest egg consists of $50,000, perhaps the result of careful saving, plus a small inheritance. Can you reasonably expect anyone with skill to be interested in giving you a hand?
Surprisingly, the answer is "yes." Many advisers, and some who have been in the financial advising business for many years, are accepting candidates with relatively smaller amounts to invest. In the jargon of the trade, advisers "offer portfolio management." This means they tell you what stocks to buy, and when to sell. In the stock market, timing is everything, so selling out can be as important as buying in.
While the big investors with those million-dollar portfolios rate the undivided attention of the adviser, it's probably unrealistic for others to expect the same personalized treatment. What the family with $50,000 to invest gets is a kind of group therapy. The adviser will make general decisions and apply them to numbers of clients whose situations are similar.
Is that bad? Not really. Unless you're quite unusual, your aims and hopes will be similar to those of a lot of other people. Broad-scale advice, therefore, isn't necessarily second rate. Far more important than how many people are getting the same investment advice is the question of the kind of advice they're getting. The skill of the financial adviser is everything. It ought to override all other considerations.
How can you judge his skill? That's the hard part. If the adviser has been offering investment advice for several years, he or she will be able to illustrate his track record over this period. An individual adviser does this by showing the results achieved in a model portfolio. Another allows examination of an investment account held by a member of his family.
If an adviser is new to this phase of the business, about all you have to go on is faith. His background and experience play an important part, but it's just about impossible to know how well he will guide your fortunes.
by: Rayce Banner
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