Monterey Herald, Financial Advisors
Q: I want to learn about investing, but I always feel like financial people are trying to sell me something. Where can I get the information I need without having to worry that someone is trying to take advantage of me?
A: I understand why you might feel a bit wary. Most investment advice is given by individuals who have strong incentives to sell financial products. While most advisors are honest and ethical, it is always wise to keep your eyes open for conflicts of interest.
An advisor who gets paid to sell a product has an inherent conflict of interest. If you want to avoid that kind of situation, I suggest you look for a “fee-only” advisor. Fee-only advisors get paid only by their clients much like an attorney or a CPA. Fee-only advisors are legal fiduciaries, which means they have the legal obligation to put your interests first. However, no matter which kind of advisor you use, it is important to do your homework.
Investing is a highly technical field of expertise, so it can sometimes feel intimidating when you first get started. To be successful you need a solid foundation in economics, experience in the financial markets and a clear understanding of how specific investments work. In addition, making sure your investments fit your unique situation requires an understanding of portfolio design and financial planning principles. With all the complexity, it isn’t surprising that people sometimes struggle to understand what they are buying or how to compare various options.
Recognizing that beginning investors need unbiased information from authoritative sources, the U.S. Securities & Exchange Commission (SEC) and FINRA, the non-governmental regulator of broker-dealers, maintain websites that are informative and educational.
If you are new to investing and want to learn more, the SEC website (www.investor.gov) is a great place to start. Just go to the site and start poking around. On the site’s main landing page, you will find a menu of options that will help you get the information you need to start investing, including how to decide if you should work with an investment professional, how to decide what kind of advisor is right for you, and how to select an advisor. It also includes a link to do free background checks on registered investment advisors and their firms.
If you click on the menu option for “investment products,” you will be taken to a page that contains a list of investment products ranging from “Auction Rate Securities” to “Structured Notes with Principal Protection.” Click on a particular investment and you will be taken to a page that describes how the investment works, its primary risks, basic terminology, what fees are typically involved, as well as links to related information. More common products like stocks or mutual funds have more information than less common products, but it is a good place to start.
The SEC website also contains a page titled “Research Before You Invest.” Here you will find some great resources for doing due diligence on potential investments, including entries on how to access and read the annual and quarterly filings public companies are required to make with the SEC.
The FINRA website (www.finra.org/investors) contains similar information to that found on the SEC website, but I particularly like the section on “Choosing an Investment Professional.” This page describes the various types of advisors, what they offer, and how they are regulated. There is also a link to do a background check on your broker.
Another helpful resource is provided by the Consumer Financial Protection Bureau (consumerfinance.gov). This website does not deal specifically with investments, but it contains important information about a number of other financial topics from auto loans to reverse mortgages. Its stated goal is to help make sure individuals are “treated fairly by banks, lenders and other financial institutions.”
Whether you invest on your own or seek the help of a professional, learning more about investing and personal finance will give you greater confidence in the process. It will also help you make informed decisions about who you trust to give you the advice you need.
Steven C. Merrell MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey. He welcomes questions that you may have concerning investments, taxes, retirement, or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA 93940 or email them to firstname.lastname@example.org.