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Money Matters: How do you get money advice?

Aug. 10, 2010 at 3:10 a.m.


Currently, there is another $100-million-plus Ponzi scheme unraveling, this time in Minnesota. Sadly, many victims went to church with Trevor Cook and Pat Kiley, trusting that these investment advisors were good, churchgoing Christians.

I have gone to First English Lutheran Church since moving to town. Over the years, I have served on the finance committee, been congregation president and also treasurer. In fact, each of our staff is involved with different churches in Victoria.

Given this, do we deserve a free pass? Absolutely not. Just because you go to church with someone does not mean they should be automatically trusted with your money. Church is full of sinners - myself included.

Although there are many good advisors in the Crossroads, it is helpful to ask a few questions first.

1. Follow the money. Do they work on commission or are they a fee-only advisor? If paid on commission, know that different products pay different commission levels. There can be an incentive for an advisor to recommend one product over another. Request, in writing, all of the ways that an advisor will get compensation or benefit from managing your money.

2. Are you a fiduciary? Different investment advisors have differing levels of care owed to a client. A fiduciary is legally obligated to do what is in the client's best interest - and not just sell them a product. If an advisor is not a fiduciary, determine how that will affect you.

3. Get statements from a reputable firm. Crooks such as Bernie Madoff were able to keep their clients in the dark because Madoff was not only the advisor, but he also owned the brokerage firm. This made it easy to alter brokerage statements to say what Madoff needed them to say to keep the scam going. We recommend clients have their transactions and assets verified by an independent, third-party brokerage firm such as Charles Schwab or TD Ameritrade.

4. Nothing is "risk free." I don't care what you invest in, whether it's US Treasury bonds, CD's or stocks - they all have elements of risk. If someone tells you their investment strategy is "risk free," run for the hills.

5. What is the goal? Every person is different and deserves an investment program that compliments their goals. At a minimum, this requires knowing how long you can invest your funds, how much volatility you can withstand, how much income you require, etc. Establishing a good relationship with an advisor requires you to know what your destination is.

6. Do a background check. Whether through the Financial Industry Regulatory Authority, the insurance commissioner, state securities board or the Securities and Exchange Commission, there are many ways you can check out an advisor. Determine if the advisor has a pattern of being sued or sanctioned.

7. Termination fees. Not all relationships will last. If you move on, are there termination fees which may hold you hostage?

This offers a good starting point. However, as with all things, a good deal of common sense and regular monitoring is necessary to keep your investment plan on target.

Dave Sather is a Victoria Certified Financial Planner and owner of Sather Financial Group. His column, Money Matters, publishes every other Wednesday.

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