INVESTOR HELP

In my view, an investor will be better served in most circumstances by hiring a money manager rather than a salesman or third party intermediary. How do you know if you are dealing with a money manager?

Do they select the investments themselves, whether they be stocks, ETFs or mutual funds?

  1. Is the portfolio actively managed to account for changes in the stock market, economy and general business conditions?
  2. Do they owe you a fiduciary duty to do what is in your best interest? All registered Investment advisors have this responsibility. The majority of financial advisors do not.
  3. Do they have an investment strategy? What research or training is it based on? What investment books have they read and studied?
  4. How has the investment strategy worked in the real world? What is the performance record over at least five years in up and down markets? If they are unable to give you a performance record, you are not dealing with a money manager or someone that does not have a good record.
  5. Do they sell proprietary products and receive commissions for their sales? Can they buy any mutual funds or just those allowed by their employer? This poses an inherent conflict of interest.
The answers to the above questions should clarify what type of financial professional you are dealing with. If you are dealing with a stockbroker, they have to disclose the following; "Our interests may not always be the same as yours... We are paid both by you, and sometimes, by people who compensate us based on what you buy."

Advantages of rolling over or transferring a 401(k) to an IRA when you leave your employer or retire:

  1. Lower costs: Many 401(k) plans have a multitude of administrative and bookkeeping fees which are difficult to determine the amount of.
  2. More selection of investment options: Most 401(k) plans have limited investment choices. Some are limited to one mutual fund family. None will have all the possible mutual funds and ETFs if you transfer the account to a broker-dealer.
  3. Professional money management: If you have control over your account you can hire an investment advisor to make your investment decisions for you. In the early 1980s, the state of Nebraska gave their employees the choice of a 401(k) type plan or a traditional pension managed for them. It was terminated a few years ago due to the poor performance by individuals managing their own money.