Getting investment advice | finding a financial advisor

Many people are on the lookout for new advisers since the financial crisis caused many portfolios to take major hits in 2008. Whether you have been investing for many years or new to this whole realm, here are some tips on finding a good financial adviser.

Getting good investment advice is one of the most important things that you can do to get you the best return on your money as possible.  It’s much more than just getting help with picking stocks to buy.  You need a comprehensive strategy that fits your risk profile, goals and income.

Types of Advisers

There are basically two types of financial advisers.  Unfortunately, they don’t always necessarily represent themselves in these categories, even though it’s the most important distinction they could make.  I’m not saying one is necessarily better than the other, although I do lean a specific way.

Regardless of my opinions, it is important for you to understand the differences so you can make up your own mind with the best information available.  It’s also a good idea to learn how to invest in stocks for yourself instead of relying on other people’s advice.

Commission Brokers

These are the most familiar in pop culture.  These would be people like stock brokers and commodities brokers.  They may even represent themselves as advisers, but they are really salespeople.  These guys usually just give stock tips or general research on specific companies and economies.  They don’t sit down and help you come up with an overall investment strategy.

It’s important that they ultimately make their money on trading commissions or by selling specific investment vehicles.  You need to understand where their money is made in order to understand how they motivated.

Remember that commissioned brokers make their money by selling you stuff, not by giving you advice.  Any investment advice they give you will be to the end of you buying or selling a security.  Although this doesn’t necessarily mean they will give you bad advice, it means that whatever the advice is, it will encourage you to have high activity.

In addition, many of these brokers may get more commission on investment products that are offered by their institution.  You need to keep this in mind when you are getting advice from these guys.

If you’re just doing stock market trading without thinking about long term investing, this may not be important to you.

Fee Based Financial Advisers

These are advisers who make a flat fee by giving you advice.  They will most likely go over your entire personal financial situation with you before making any recommendations.  They may even help go over some materials on how to invest in the stock market with you so you understand your investments.  In addition, they won’t make any commissions when you buy a stock or mutual fund.

If you want the most objective advice as possible, I think you will have the best chance with fee based advisers.  They are not motivated to sell you specific investment products.  In addition, they won’t push you to buy a bunch of stuff unless it’s to your benefit because it won’t really make a difference to their bottom line.

Online Stock Market Trading Account

The next thing you will probably need to do is set up a trading account with a stock broker.  Most people these days go with an online stock broker.  The big ones that most investors use are Etrade, TD Ameritrade, and Scottrade.  Just put a “.com” after their name and you are there.

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