Joe Macek is a Cross Border Investment Advisor and Portfolio Manager with iA Private Wealth and iA Private Wealth USA, with over 25 years of expertise in the investment world. Based in Winnipeg, Manitoba, with offices in Toronto, Ontario, and Vancouver, British Columbia, he offers comprehensive advice across seven provinces ( BC, ALTA, SASK, MB, ONT, QB, NFLD), as well as cross-border services registered in Texas, USA.
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Unlocking the 7 Secrets Embraced by Confident Retirees When Selecting an Investment Advisor
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Unlocking the 7 Secrets Embraced by Confident Retirees When Selecting an Investment Advisor
Selecting an investment advisor is a significant life decision that can profoundly impact your financial journey for the years ahead.
According to a 2020 study by Northwestern Mutual, a staggering 71% of U.S. adults acknowledge the need for improvement in their financial planning. Surprisingly, only 29% of Americans actively engage the services of a financial advisor.
While financial advisors are legally prohibited from guaranteeing specific returns, research suggests that individuals who collaborate with them tend to experience greater peace of mind concerning their financial matters. Moreover, they could potentially accumulate around 15% more funds for their retirement.
To illustrate this, consider the findings of a recent Vanguard study. On average, a hypothetical $500,000 investment would grow to over $3.4 million when managed by an advisor over 25 years. In contrast, the expected value from self-managing such an investment would be just $1.69 million, which is 50% less. In essence, an advisor-guided portfolio would yield an average annualized growth rate of 8% over a 25-year period, compared to the 5% expected from a self-managed portfolio. This underlines the substantial benefits of working with an investment advisor.
Familiarizing yourself with these seven prevalent pitfalls when selecting an advisor can provide you with a sense of security and potentially spare you from years of anxiety.
Always Opt for a Fiduciary Advisor: It’s crucial to hire an advisor who operates as a fiduciary, which means they are morally obligated to act in your best interests. Fiduciary financial advisors are required to steer clear of conflicts of interest and must openly disclose any potential conflicts to their clients. If your current advisor is not a fiduciary and continually promotes investment products that may not be in your best interest, consider utilizing this no-cost tool to locate an advisor who genuinely has your best interests at heart.
Avoid Rushing to Choose the First Advisor You Encounter: While it may be tempting to select the advisor nearest to your location or the first one listed in the directory, making this decision warrants more careful consideration. Invest the time in interviewing at least a few advisors before determining the most suitable match for your financial needs.
Ensure the Advisor’s Specialty Aligns with Your Needs: Financial advisors often specialize in specific areas, such as retirement planning, serving business owners, or assisting high-net-worth individuals. Some may excel in catering to young professionals just starting their families. It’s crucial to understand an advisor’s strengths and weaknesses before finalizing your decision.
Confirm Alignment of Investment Strategies: Each advisor employs a distinct investment strategy. While some may advocate for aggressive investments, others may lean towards more conservative approaches. If you prefer an all-in approach to stocks, an advisor who primarily recommends bonds and index funds may not be the ideal fit for your investment style.
Always Inquire About Their Credentials: For the provision of investment advice, financial advisors are required to pass specific tests. Don’t hesitate to ask your advisor about their licenses, examinations, and credentials. Among the common tests are the Series 7, Series 66, or Series 65, or the CSC, CPH and CIM in Canada. Some advisors take an additional step and attain the title of Certified Financial Planner (CFP).
Comprehend Their Compensation Structure: Financial advisors may follow various compensation models. Some are “fee-only” advisors, charging a fixed rate, regardless of your investments. Others operate on a percentage-based fee structure, taking a portion of your assets under management. However, some advisors receive commissions from mutual funds, potentially creating a significant conflict of interest. If an advisor’s compensation incentivizes them to act against your best interests, it’s advisable not to hire them.
Select a Thoroughly Vetted Advisor: The likelihood is that there are several highly qualified financial advisors in your local area. However, the process of choosing the right one can feel overwhelming. To ensure that the financial advisor you’re considering is registered and in good standing, it’s prudent to utilize the U.S. Securities and Exchange Commission (SEC) website. The SEC provides a free online tool called the Investment Adviser Public Disclosure (IAPD) system, which allows you to research the background of investment advisors and firms. You can access vital information such as their registration status, any disciplinary history, and details about their services. It’s a valuable resource for performing due diligence and verifying the credibility of your potential advisor. By cross-referencing the information provided by the advisor with the SEC’s records, you can make a more informed decision regarding their qualifications and suitability for your financial goals. In Canada this would be on the CIRO website, specifically the Know Your Advisor Report card.
In conclusion, the decision to select an investment advisor is a pivotal one, with far-reaching implications for your financial journey in the years to come. As the 2020 Northwestern Mutual study highlighted, the need for improved financial planning is acknowledged by a significant 71% of U.S. adults, yet only 29% actively seek the guidance of a financial advisor. While these professionals cannot guarantee specific returns, research suggests that their expertise can instill a profound sense of financial security and potentially increase your retirement nest egg by approximately 15%. This was vividly underscored by a recent Vanguard study, which revealed that advisor-managed portfolios tend to outperform self-managed ones by a significant margin.
To navigate the path of advisor selection successfully, it’s essential to remain mindful of the seven key secrets shared here. The foundational principle is to always choose a fiduciary advisor, someone bound by ethical duty to act in your best interests. Taking the time to interview multiple advisors, ensuring their specialization aligns with your needs, and confirming the alignment of investment strategies are all critical steps. Additionally, inquire about their credentials and comprehend their compensation structure, keeping a vigilant eye on potential conflicts of interest. Furthermore, the importance of selecting a thoroughly vetted advisor cannot be overstated; leverage resources such as the U.S. Securities and Exchange Commission (SEC) or its Canadian equivalent, the CIRO website, to perform due diligence and make an informed decision regarding your financial future. By embracing these secrets, you can embark on a confident and secure financial journey with the right investment advisor by your side.
Have Questions? Contact us
We’ve assisted our clients through every stage of life. Even when you’re not aware that something might impact your financial future, it likely will to some extent. Engaging in a conversation with your investment advisor about any financial changes is an excellent approach to keeping your financial goals in focus.
For more information or to connect with me, you can reach out via email at macekadmin@iaprivatewealth.ca or get to know me better by exploring my engaging video content on YouTube https://www.youtube.com/@joemacek.
I share valuable insights and discussions on financial planning, market commentary, and investing concepts that can further enrich your understanding. Join me on my channel to discover more!
Don’t hesitate to reach out today at 1–888–324–4259 to discover more about how we can help you achieve your investment milestones.
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