Signs of a Bad Financial Advisor

Here are signs that will tip you off to a bad financial advisor.

This came from a post originally credited to Suze Orman. I looked at this list and compared it to my first financial advisor who put me into an annuity and also invested in Putnam B shares. Both "no-nos" as far as Orman is concerned. See my post here: http://donbizblogger.blogspot.com/2007/08/my-financial-advisor-why-i-fired-one.html

Signs of a Bad Financial Advisor

The article is well-written. Take heed. Now, there may be exceptions. Is there always something better than "B" shares, or when are they the best option?

My financial advisor: Why I fired one and hired another

Saving for retirement was a consistent activity of mine since shortly after college. I went to work for three different non-profits after college. The last one didn't match our contribution but we brought in a financial advisor around 1997 who allocated my savings in Putnam funds.

He was recommended by another person that myself and another staff member respected.

He promised to update us once a year and he did have me meet at his office to get started.

By 2003, I hadn't heard from him for about 2 years. Although I was receiving my Putnam statements so I wasn't concerned. Then he called and mentioned he'd like to take my wife and out for lunch and discuss an Allstate Advisor Variable Annuity. He asked me on the phone would I like a guaranteed retirement income. Of course my answer was yes.

But I knew annuities were a conservative vehicle for people much closer to retirement age, not those in their early 40s. And, I figured if it was coming from an insurance company like Allstate then growth was not a goal; protection from loss would be the objective.

The selling point was you would never drop below a 5% return. But you would never get above 8%, either.

We went to lunch and I hadn't any time to do research on the topic, but I did ask him about his commission. He mentioned, yes, he would get a nice commission from the transfer of funds. He was personable but I felt uneasy. We signed documents. I moved my Putnam funds (I can't remember how much but it was a significant percentage) into the Allstate Advisor annuity. I was just starting a business with two other people, but he didn't ask about that and the best retirement vehicle.

Ironically, right after we signed, I felt it was time to look for another financial advisor. He didn't do anything wrong and my finances were in okay shape, but I felt he was looking out for his interests, primarily. I felt like we had been taken to lunch in order to make a sale.

Ah, a customer experience lesson: if you lose touch with your clients or customers then you call them when you want something from them, they may feel used.

I was a member of our local chamber of commerce. I heard another financial advisor introduce himself by saying he started investing when he was age 17 and he enjoyed helping others build wealth. He was about my age, but I did become intrigued by his "elevator speech."

He dressed low key in a frumpy open collar shirt and during chamber breakfasts and lunches, I learned about his investments in real estate and stocks.

Eventually, I asked to meet with him. He carefully critiqued my Allstate Advisor investment and I asked "what would you do?"

He's with Edward Jones and I felt comfortable with the firm. We talked about annuities and commissions, stocks and mutual funds.

During our 3 years with him, he has his assistant call us annually to set up a regular review. Our family is complicated with two boys who came to us as guardians in their teens and he helped us set up funds for them.

Perhaps I'll write another post on how he looks at allocating our money. For example, I have 300 shares of Intel stocks but he advised us a year ago, or slightly more, not to invest in any more shares. And he gave the reason why we would be better with mutual funds - mostly American Funds.

I believe it is important to have a financial advisor. But you do have to choose someone whom you believe is working well on your behalf.

Investing: My Smartest Money Move Ever

Money growing for me, compounding year in and year out, always had an appeal.

I vividly remember as a grade school child helping my parents outside our house when my grandparents, of the Depression-era and World War II generation, were visiting. My grandmother found a dime on the ground and gave it to me to save.

She said something like, "that's how the Mellons and the Rockefellers got their money."

Saving money appealed to me. It represented security and a tangible reward for a personal discipline.

The first 20 years of my career after college took me through a short stint in radio broadcasting before I entered the non-profit world where I wrote and edited a small monthly magazine for a Christian mission organization. I didn't earn much money. As a young newscaster in Central Pennsylvania I made about $4.95 an hour. That was just above minimum wage.

But I started saving on a regular, consistent basis. I may have set aside about $25 per month. This is when I started saving for retirement and I consider that the smartest money move I have ever made. I started saving young and I avoided debt.

Then I entered the non-profit world where I had to raise my own support. I am embarrassed to say how little money I earned although I developed life-long friendships. But the good news is I was making so little I also couldn't spend money on small items or big ticket items.

Anything extra I wanted, I had to find a way to earn through small, part-time jobs. One time, I bought a plane ticket to Vancouver so I did a few weekends of phone sales. This strategy kept me out of debt.

A few years later, by age 26, I got married to a woman who was a nurse and just got her master's degree as a nurse practitioner. She came from a missionary family and her parents had lived frugally. She made a good income as a nurse, but she gave generously to people in need and she, too, saved.

My marriage to her was the second smartest money move I ever made!

During our first year of marriage, I went to work for another non-profit where I didn't earn much per hour but they matched up to 3% of the money we put into retirement savings. I set aside 10% of my income and had the 3% matching.

I also started investing in Janus Funds at this time after reading through various publications like Money and Forbes. Okay, I wasn't real sophisticated but I kept a simple plan of saving as much as I could and consistently.

By the way, Investopedia is my favorite web site for learning about all types of investments and learning how to interpret data.

Saving money, especially for retirement, is the smartest money move a person can make. I have a passion to tell high school and college graduates to save long-term early on - whether it's for a home or retirement. Starting early means you'll not have to try to invest large sums of income later on to catch up.

I know there are different, specific strategies for older investors who didn't start young but the same principles apply - being consistent and managing debt load.

I've never earned much money compared to my peers but we've managed to build a significant retirement base while managing our debt, even during recent years when I've had financial and career strugggles.

Saving money for your needs 5 to 10 years down the road, and saving for retirement, doesn't mean you're greedy. In fact, we've become adoptive parents to 4 children (now mid-teens to age 22) and guardians to 2 boys who moved into our home during their teen years. Our one son came to us last year at age 19 and we were the first family he ever had. We are also grandparents to our 6-month old granddaughter.

Out of 7 kids (which includes our granddaughter), 5 have serious emotional and even developmental delays. We may be faced with their care at some level for many years to come. We can't count on their help at retirement age so the smartest money move we can make as parents in our mid-40s is to make sure we have the retirement money we need.

My advice: be consistent and be content with modest gains.

Mutual Funds: T. Rowe Price compared to American Funds

Mutual funds are a great way to invest.

But which ones do you choose? Here is an article where the writer compared T. Rowe Price to American Funds.

T. Rowe Price or American Funds

Thanks to Christi Bowers of Hagerstown, Maryland.