Investing 101: Updated and Expanded

Chapter 16. GETTING HELP

Okay. You've read the book. You know that you probably can invest on your own. But what if you don't want to? What if you prefer to hire someone to help you allocate your assets, pick individual stocks, and occasionally just hold your hand when the market activity makes you nervous?

Then you need to hire a financial planner to help. However, choose your planner carefully. Get recommendations. Look for important professional designations. And check out the planner with state and federal securities regulators to make sure he or she doesn't have a criminal record or a history pockmarked with investor complaints. After all, your future comfort may hinge on just how well this planner serves your best interests.

CHOOSING AMONG FINANCIAL PLANNERS

Before you start looking, it is also important to know how financial planners earn their money. There are three different options: commissions, fees, or a combination of both.

Commission-based planners are usually paid out of what you invest. For example, if you invest $10,000 in a mutual fund with a 5 percent load, only $9,500 is actually invested. The other $500 is paid to the planner who recommended this fund to you. Commission-based planners also make money from commissions generated from selling you life and disability insurance, limited partnerships, and other investments.

Unfortunately, many consumers are drawn to commission-based planners simply because it appears that their advice is free. That's because the commissions ...