If you are thinking about working with an investment adviser there are some practical steps you must take if you want to make an informed decision. The first thing you should do is determine why you need to speak with an investment adviser.
- Do you need a 2nd opinion on which investments are the most suitable for you? If so then perhaps that particular investment is not a good idea. Superstar investor Warren Buffet recommends investing in things you can understand so if the investment is complex it may not be suitable for you.
- Do you need help developing a tax efficient investment plan? In this capacity the investment adviser should be able to give you some helpful tips on what investments provide the most preferential tax treatment.
How is the Investment Adviser Compensated?
This is one of the key things you need to review when trying to determine whether you should hire an investment adviser is how are they compensated? If they are compensated based on a flat fee or hourly rate you should take them more seriously than individuals who receive a commission based on trading. Investment advisers who are paid based on trading activity will be motivated to create reasons why you should trade instead of helping you reach your goals. Try to identify an investment advisor that has their compensation tied to the performance of your investment. You can pay a nominal fee for their services but the bulk of their income should be tied to how your investments do. By using this approach the interests of the investment adviser are aligned with yours.
When you have identified the investment advisers with the most aggressive compensation plan you can move forward and hire the one best suited for your investing style. The sooner you start investing the more money you can earn so begin sourcing for the adviser right away.