02-10-2014 08:17 AM
Content provided courtesy of USAA.
by Scott Halliwell
CERTIFIED FINANCIAL PLANNERTM practitioner
How do you know if you're getting good financial advice or getting ripped off? Because the industry is so complicated, it's often hard to tell. Let's face it, there's a lot to know and it changes often. Even worse, not everyone who claims to be a financial advisor is looking out for your best interest.
Words That Raise a Red Flag
If anyone who's trying to get you to invest ever uses the words "guaranteed" and "superior" together, do yourself a favor: Get up and leave, click on a new website, change the channel or continue with whatever else you were doing before your world suddenly slipped into the realm of fantasy.
Think about it: If these crack advisors knew for certain they could outperform all the other players in the industry, do you think they'd tell anyone about it? I doubt it. Instead, they'd probably use that knowledge to create insane wealth for themselves and perhaps a few close friends and family members. They wouldn't need you or anyone else to hire them because they would already be a money-making machine! I mean, how cool would it be to know you'd always win in the investing world?
You might be thinking, "Come on, who'd ever fall for a ruse like that?" Unfortunately, lots of people do. Why? Because those promising the moon are often a pretty convincing group and investing is a pretty confusing topic for lots of people. Plus, these advisors are telling potential investors what they want to hear. After all, who doesn't want to believe that guaranteed superior returns are within reach?
Here's the thing, though: Investing just doesn't work that way. Can someone help you get better educated as an investor? Sure. Can they help you make better decisions? Absolutely. But can they guarantee superior returns? I think we already know the answer to that.
A More Measured Approach
So if the promise of guaranteed superior returns is the stuff of make-believe, just what should you expect to get from trustworthy investment advisors? Personally, I'd look for professionals or organizations that can:
- Present you with a well-thought-out approach to investing.
- Tailor the plan to your situation and tolerance for risk.
- Help you clearly define your financial goals and give you a better chance of achieving them than if you invested on your own or avoided investing altogether. (Notice I said "better chance," not "guaranteed success.")
- Help you gain at least some level of understanding of what they're recommending, why they think it's right for your situation and how they expect it to work.
- Be there with you day by day and year by year as you, your goals and your situation change.
Surely, you've heard the saying, "If it sounds too good to be true, it probably is." While I don't know the origin of that adage, I doubt it was coined exclusively as a cautionary warning to investors. But it certainly could have been. So, do yourself a favor and heed those words. Don't fall victim to someone's slick line. Instead, take a more measured approach and keep yourself and your money out of harm's way.