Choosing a financial advisor with careful research can reap benefits
Properly investing money in order to get a significant return on investment requires knowledge and information, and financial advisors can provide that.
A Spectrem Group study from October 2012 reported that 72 percent of investors said working with a financial advisor improved their knowledge of investing. Seventy percent of investors with a net worth of between $500,000 and $1 million (not including primary residence) said financial advisors improved their investment returns. Only 2.5 percent overall said they saw no benefit in working with a financial advisor.
The study indicates that those investors who have used financial advisors have received benefit from doing so, which would indicate that using an investment advisor is a good idea.
From the October study, only 39 percent of investors regularly work with a financial advisor, but that number climbs based on the investor’s net worth. Among Ultra High Net Worth (net worth between $5 million and $25 million not including primary residence) individuals, 56 percent said they work with a financial advisor.
Fifty-six percent of business owners use a financial advisor, and 60 percent of senior corporate executives employ investment advisors, the study reported.
Among those respondents who work with an investment advisor, 64 percent said it provides a wider range of investment opportunities, and 57 percent said using a knowledgeable financial advisor provides them with peace of mind.
Only 21 percent listed “fear of being taken advantage of” as a disadvantage of working with a financial advisor.
From a third quarter 2012 survey of Mass Affluent (net worth under $1 million NIPR) investors, almost 70 percent said they were satisfied with their advisors’ performance. Less than 30 percent of Mass Affluent investors, and 41 percent among Ultra High Net Worth ($5 million to $25 million NIPR) investors, say they have had a bad experience with an advisor. That number does go up above half (56 percent) for UHNW individuals with net income greater than $15 million.
Almost 60 percent of both Mass Affluent and UHNW investors said they would recommend their advisor to some else.
There is concern about people who offer advice on financial products but are really just out to make a quick buck. That’s why the federal Securities and Exchange Commission and state governments offer guidelines for selecting financial advisors who are regulated and licensed.
The State of Illinois has gone so far as to set up a website named “Avoidthescam.net” to help investors determine whether they are dealing with a reputable and reliable financial advisor. Many Secretary of State websites offer such advice as page links on their own SOS website.
At New York’s www.dos.ny.gov, the Department of State website offers a web page that provides the same information that can be found at www.avoidthescam.net. In Massachusetts, the website for the Secretary of the Commonwealth of Massachusetts has a two-page report aimed at senior investors about how to avoid fraud (http://www.sec.state.ma.us/sct/sctinv/pdf/How_to_Avoid_Inv_Fraud.pdf).
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.