How Do You Find The Advisor for You?

Since there are good Investment Advisors and bad ones, how do you find former and avoid latter? Good question, and there are some keys. Most large brokerage firms list Investment Advisors they work with and maintain information about their past performance. This is not a foolproof resource, though, since they tend to recommend Investment Advisors who invest in their products or clear their business with firm. So if you pursue this avenue, you need to watch for conflict of interest issues.

You can always subscribe to one of numerous database services that include information, and sometimes rankings, on Investment Advisors. These services tend to be fairly pricey, though, so they may not be your best choice. Another option is to find articles (yes, like this one) or free newsletters written by Investment Advisors. If you find one or several that make sense to you, check out IA and see if there's chemistry between you.

When checking out advisors, here are some things to keep in mind:

1. Verify their record -- look over their past performance; 2. Consider their system. Will it work in different market environments?; 3. As best you can, check out their operation and 4. See if they've had regulatory problems. 5. Equally important as doing your due diligence is making sure there is good communication between you and your advisor and that you trust this person with your money choices.

Another quick free way to scan through a select database and find a wide variety of candidates is with www.investortree.com . I'm registered there myself as an advisor and know that company did a background check regarding registrations and regulatory issues.

An important question to ask is how advisor gets compensated. You want to stay away from commission junkies or salesmen disguised as advisors. I believe that you will get best unbiased advice from someone who is paid a management fee based on value of assets that you entrust them with.

To take it one step further, ask if advisor invests his own money in same methodology that he recommends for his clients. If he doesn't, ask why. If you don't like answer, close your check book and run as fast as you can.

Choosing an Investment Advisor can yield long-term high profit benefits. I encourage you to consider it if you haven't before. However, as with any relationship, make sure there's a fit before you jump into it.

Then there's sad story of incompetence in mutual fund industry. There are hordes of inexperienced financial planners (commissioned salesmen) just waiting to sell you load funds (A and B shares), or to recommend an asset allocation approach with no real plan or strategy that will serve you in a bear market.

Of course, there's always option of having a perfectly balanced portfolio designed. Such was case when a prospective client phoned me in 1999 during height of technology boom. He felt left out because everybody was making money in one of history's great bull markets, but his portfolio was so well balanced that he was neither making nor losing anything. He would have been better off in a money market account.

To me, term balanced portfolio translates into this: I have no clue what I'm doing, where major trend is, what I should be buying or whether I should be in market in first place. I'm hedging so much that one investment goes up and another goes down.

Balance is one thing and safety is really quite another. And mutual funds do not automatically mean either safety or balance. The key is always information-knowing how to get reliable info and what it means once you have it.

This is not for everyone. If you have money to invest and you don't have time or inclination to do homework, then your smartest move is to find someone you trust. That would be someone with a track record you can verify, and someone who is not going to make money off your investment every time you buy or sell something.

People like this do exist, and good news is you only need to do your homework once. That's when you check them out. From then on, you can relax knowing you're just not likely to fall prey to any of rip-offs that are out there.