Friday, June 24, 2016

British Voters Shock the World ... When Choosing a Knowledgeable Financial Adviser, Use the 'Dual MOM' Approach and Work Hard to Pick One Who Also Has His 'Long Term' Skin in the Same Game

The political and financial worlds are in shock this morning as the British people have unexpectedly voted to exit the European Union. Get ready for a hard fall in stock prices.

What this all means, politically, financially and otherwise, including Europe and the rest of our world, will only be determined over time, of course.

But one thing is certain --- it adds to the global strife and uncertainty surrounding terrorism, immigration, globalism, politics, entitlements, fiscal responsibility, governance, recessions, protectionism, world trade, income inequality and economic growth. Chaos reigns throughout the world.

Who the new British Prime Minister will be after David Cameron resigns in a few months will be interesting to observe. Donald Trump is having a good day with all this chaos going on, and that's
for sure.

Predictions are dangerous -- especially those about the future, as the surprising Brexit vote has demonstrated once again.

What's an individual saver and investor to do? I'm doing nothing today, and you should consider doing that same thing --- nothing.

So let's look at the relevance of solid ongoing financial advice and its importance to individual savers and investors in this unfolding and ongoing world in chaos --- politically, financially and otherwise. What's an individual to do?

Well, here's my advice, for what it's worth --- stay in the saving and investing game over the long haul.

And when selecting a financial adviser to work with and learn from over that same long haul, recognize and accept the simple fact that it's very important to do your homework upfront.

That's because there are a whole bunch of self serving charlatans out there who know nothing about the world of successful long term investing.

It's also important to choose one who has skin in the same long term investing game that you'll be playing to win.

And the fact is that too many perhaps well intentioned but high priced advisers, while not phonies, know very little about successful long term investing. And those often high priced and underperforming advisers can be dangerously hazardous to your long term financial health and well being.

Deciding if a Financial Adviser Is Right for the Job has this to say about the difficulty involved in selecting a qualified financial adviser:

The Certified Financial Planner Board of Standards hired Azmyth Kaminski, a D.J., and cut off his dreadlocks, removed his body piercings and put him in a suit. He learned a few financial phrases and sat in a conference room. Then the board brought in couples looking for a financial adviser. Credit CFP Board

"A few years ago, the board that administers the certified financial planner designation decided to test the idea that investors will ask pointed questions of a prospective adviser and not be fooled by a slick presentation.

So the Certified Financial Planner Board of Standards hired a professional D.J. named Azmyth Kaminski, shaved off his dreadlocks, removed his body piercings and put him in a suit. It taught him a few financial phrases and sat him in a conference room. Then it brought in people looking for a financial adviser. . . .

So how did he do? After Mr. Kaminski spent about 15 minutes with each person, all but one were ready to work with him, Mr. Maugeri said.

While Mr. Kaminski may have charisma, he obviously had little insight into financial matters. But the experience presents an interesting conundrum for people seeking advice: how best to determine if a financial adviser is qualified for the job. . . .

Too often people fixate on ferreting out the worst advisers. . . . The bigger issue is often not whether a broker is a swindler. The odds of that are not high. It is whether the person advising you is qualified to do the job.

And figuring out the answer takes a lot of legwork. . . .

John Bowman, managing director of the Americas at the CFA Institute, which administers the chartered financial analyst designation, said investors should ensure that the person making the investment decisions — as opposed to the adviser creating a financial plan — has the qualifications, knowledge and experience to make those selections. . . .

But how do you know if that person is truly qualified . . . ? One answer is that credentials help. They show seriousness about the profession. And that, mixed with the ability to listen to and understand your particular position, can help you reach your goals.... Mr. Bowman said. “I would just challenge them with the same question, ‘How do you feel prepared and competent to handle this person’s life savings?’”

The risk is that someone decided to hang out a shingle and become an adviser with little knowledge or because a previous career did not work out.

“Our profession has a low barrier to entry,” Mr. Bowman said. “I’m talking about all of those people out there who aren’t bound by an ethical code or have certain core competence. We need to start pulling up fortified walls to protect people.”

The chartered financial analyst designation is about a person’s ability to assess investments and provide advice on them. The certified financial planner credential speaks to the person’s ability to help clients create plans for their financial lives. . . .

Credentials, no matter how rigorous, go only so far, of course. . . .

As to the D.J. who posed as a financial adviser, Mr. Maugeri said that one person still wanted to use him as a financial adviser even after finding out the truth.

“It told us a lot about how consumers choose a financial adviser,” Mr. Maugeri said. “And how so much of it is impressions and saying the right thing.”"

Summing Up 

So when selecting a financial adviser, please take enough time to be careful, thoughtful, knowledgeable and very selective. 

Making a good choice will do wonders for your family's financial health and well being, and the best choice entails picking one who has skin in the game right alongside yours.

On the other hand, choosing a bad one is costly in too many ways to count.

In other words, MOM is too important to waste, so employ the 'Dual Mom' approach when signing up with a low cost, high value adding and educational sharing financial adviser.

It will very much be worth the effort.

That's my take. 

Thanks. Bob.

No comments:

Post a Comment