(excerpt)

If you’re worried and uncertain about how to find financial advice you can trust, you’re not alone. Almost half of Americans said it’s hard to know which sources of advice to trust, according to a new survey. …

…It’s not that surprising people are unsure whom to trust. In addition to the many stories of fraudsters who bilked investors out of billions of dollars—Bernie Madoff and R. Allen Stanford are just two that come to mind—financial advisers operate under myriad different rules and designations, and the method of payment can vary widely, too.

You may pay that adviser an hourly fee, a percentage of your assets or an annual retainer, or that adviser may earn commissions on products you buy. …

…The survey findings echo another recent survey, conducted for AARP, which found that just 23% of savers “completely trust” their retirement-plan provider’s investment advice. Read: 401(k) advice: Can you trust it? …

…When seeking advice, investors must, at the least, ask questions to confirm the adviser will act with their best interests in mind. …

…registered investment advisers are held to a fiduciary standard—they’re required to act in the clients’ best interests. Most financial planners are investment advisers. Broker dealers are held to a lower standard: they must make sure the investments they recommend are suitable for your age and overall financial situation.

That’s not to say you can’t get good advice from a broker dealer, or bad advice from a registered investment adviser. But, given their legal obligations, you may reduce some of your risks by starting with an investment adviser. …

…Generally, it makes sense to find an adviser who isn’t facing any conflicts of interest when pitching products to you. Usually, that means a fee-only adviser—someone who isn’t earning commissions off what you buy. …

…“For the person who is doing nothing else, a basic asset-allocation strategy from an online tool or a newsletter or whatever it may be, is probably better than doing nothing at all to manage your money,” said David Kudla, chief executive and chief investment strategist at Mainstay Capital Management LLC, a fee-only financial advisory firm. …

…Kudla says that the value of paying an investment adviser such as himself is that you move beyond the static asset allocation plan.

For example, Kudla said, he’s made a point of shifting his clients’ assets out of bonds that will go down in value as interest rates rise. That kind of tactical adjustment is unlikely at an online investment manager using a static asset-allocation model….
 


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