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tony

What You Need To Know-How Advisors Get Paid

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There is already a long discussion on finding a financial adviser: http://board.403bwise.com/index.php?showtopic=5751.

 

IMO, it is just as, or even more complicated, time-consuming, and psychologically onerous than learning to be a DIYer. You have to also trust this person, and trusting a human being is the most complicated and risky. It's nuts. By the time you learn all of the factors involved, you know how to invest, with most of the psychological factors involved too.

Okay, so you find out how they are compensated, then you have to wonder about their "alternative investments" recommendations. Almost every "adviser" tells me you want more than the indexes, "I have alternatives for you", and they are usually some type of illiquid REIT.

 

Articles always claim they can save you a ton in taxes. If you are a highly compensated professional, I agree as taxes are very important. But not us public school teachers. I never had to worry about taxes in my career and besides the most efficient tax investment are index funds. And then, in a 403(b) or 457(b) plan, taxes are deferred. IMO, for us plain and ordinary teachers, taxes are not an onerous issue. Obviously, if teachers are moonlighting with another business or have rental property, that's another story.

 

Tony, what was significant in this article for you?

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Steve

 

I will never use an advisor of any type again but it seems more people are doing so. There are so many pitfalls involved if one is not careful. The article is for readers who are considering using an advisor but might not understand how they are compensated or the process works. I realize this topic has been discussed in other posts but you never know who the readers of this site are at any given time and what stage of investing they are in. I wish I had run into this type of article much earlier in my life.

I was a teacher and yes I did have tax issues because I chose to invest in taxable accounts as well as sheltered accounts. At times it was complicated and had tax ramifications and I needed professional tax help. That was before the advent of turbo tax however.

 

If there is one thing I think is most important is trust. You can't just walk into an office and feel it. You need to be careful. You need to be aware, you need to be knowledgable in the basics and need to be somewhat cynical of all the claims and advice dispensed.

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If there is one thing I think is most important is trust. You can't just walk into an office and feel it. You need to be careful. You need to be aware, you need to be knowledgable in the basics and need to be somewhat cynical of all the claims and advice dispensed.

 

William Bernstein said and I am paraphrasing about being more than "cynical": "If you believe that every financial adviser is hardened criminal then you will be OK."

 

It's harsh, I admit, but it gets the job done. You don't trust them, instead, become knowledgeable to keep an eye on them.

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Rant coming:

 

For us professionals who assist users on this site - free of charge I might add - threads like this make me shake my head. Everyone has their own shortcomings in life - mine is repairs of any kind, so I rarely tackle a job myself - but for others, it's personal finance. If they would like to hire someone to assist them and save them time, money and headaches, then they shouldn't be discouraged from doing so. While it is important to ask the right questions and take time in finding a suitable advisor, treating every advisor like they're a "hardened criminal" will prevent your own financial success more than you think.

 

Please be mindful that some forum posters want to work with a professional, and they should not be discouraged from finding a supportive relationship with one.

 

Rant over.

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