I‘ve been investing in the stock market for more than 20 years. During that time I’ve never hired an investment adviser to manage my portfolio. The primary reason is cost. A close second reason is that I enjoy investing.
But if I’ve learned one thing from running this website it’s that how I handle my investments is not always the best approach for everybody. If you’re ready to start investing but don’t know where to begin, you might think about hiring an investment specialist to help you.
Like most financial decisions, there are pros and cons to seeking help with your investments that you should consider before making your decision.
Obviously, when you hire an investment specialist, you’re looking for professional knowledge and experience. Investing can be complex, especially when you’re creating your long-term investment goals and game plan. Having some guidance can be helpful.
When it comes to financial planning, many of us make decisions based on emotions, such as fear about the future. This can lead to bad investing decisions that can really hurt. A third-party adviser doesn’t have as much to lose from your investment decisions, and such a big-picture, objective view can help you make better investing choices.
Some investment advisers are linked to particular companies, investments, insurances, etc. But others are independent and can give you a host of investing options to choose from. Of course, you could choose among these options on your own, but, again, having some guidance can be helpful for many of us.
Managing investments personally can take a great deal of time. You need to research your investments and potential investments, decide when to buy and sell, and educate yourself about the market. When you hire an investment specialist that you trust, you can leave much of the time-consuming research to that person.
Complicated fee structures can make it hard to discern what an investment specialist is costing you, but expect these services to be expensive. Specialists may charge by the hour, by a flat fee, or by a percentage of assets managed. Either way, these services can cost a chunk of change.
May Operate on Commission
Here’s something to look out for: free or cheap investment advice. Investment advisers have to make a living, and many who don’t charge much instead make their living through commissions on the products they sell. This can lead the adviser to recommend investments that don’t suit your needs and goals just to get the commission.
Any investment is risky, and investments made at the recommendation of specialists are no less risky. Hiring an investment specialist may give you a false sense of security that your money will be invested well, but you should always understand the risks you’re taking whenever you invest your money.
Choosing the Right Investment Specialist for Your Needs
If you do decide to hire an investment specialist, here’s what you need to look for to find the right one:
- Type of Specialist: Most licensed financial planners are investment specialists, but not all investment specialists are financial planners. If you deal with complicated taxes, want to plan for retirement, need estate planning help, and want help investing, a financial planner (with significant investing experience) is what you need. If you’re looking only for help with investments, an experienced investment specialist is a better option.
- Licensing: Investment advisers must at least be registered with their state’s securities agency, but if they manage $100 million or more, they have to be registered with the SEC. Ask about this registration and see if your potential adviser has further credentials, such as a Certified Financial Planner certificate.
- Fee Structure: You may want to avoid commission-based investment specialists because they may push you into unsuitable investments. But no matter who you hire, you need to make sure you understand — and can afford — a specialist before making your final choice.
- Demeanor: This is perhaps one of the most important aspects of choosing a financial planner or investment specialist. Here at Dough Roller, we believe it’s vital that you actually understand what you’re doing with your money. (Which is why we have an entire section on the ins and outs of investing.) The right investment specialist is one who will make sure you understand the choices you’re making, rather than bulldoze you into making choices as quickly as possible.
Whether you decide to hire an investment specialist, you should still understand the basics of making wise investments that will pay off in the long run. Educate yourself about your money, and you’ll be equipped to make better financial decisions.
Published or updated May 7, 2013.