THE COMMITMENTS
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more. Let’s say you have $50,000 to invest and your financial advisor puts you in a combination of investments that on average has a 5 percent commission.That is $2,500 in commission—a lot more than if you had paid $1,000 to be told what to do. If you have enough money (usually $50,000 or more), you can seek the services of a money manager or a registered investment advisor. Usually they charge a percentage of the amount of money you have on deposit with them. Under no circumstances should you pay more than a 1 percent fee. (If you use an advisor who charges an annual fee, please make sure you get good value for your money. I think your advisor should invest your money in either individual stocks or low-cost mutual funds. An advisor who charges an annual fee and then invests your money in loaded mutual funds with high expense ratios is bad news. You will end up paying way too much money in fees. If your advisor recommends mutual funds, they should be no-load mutual funds—or ETFs—with very low expense ratios.) Not So Fast—Just a Few More Questions If you were referred to this advisor, did the person referring you get a referral fee?
The answer should be a resounding NO.
Is this advisor currently involved in any lawsuits based on her investment advice? Has she ever been involved in any lawsuits?
Again the answer should be a big NO; if it’s yes, ask her to explain why.