The wrong kind of financial advice
When your planner steers you toward expensive investments, stop and ask the right questions.
(Money Magazine) -- At some point during his sales pitch, a financial pro is going to tell you that you should hire him because he can put you into the very best investment products.
What he really should say is that he can put you into the very best investment products that he can make money on.
Start with fixed income: Recent two- to five-year certificates of deposit from credit unions and small banks yielded from 6.3 percent to 7 percent annually and are backed by an agency of the U.S. government.
I'll bet your planner never mentioned them to you while he was selling you a bond fund. That's because these CDs don't fit our fee models: They neither pay commissions nor charge a percentage of assets to pay the adviser.
Admittedly, some of these CDs aren't easy to find. But an hour spent online shopping for CDs will be far more productive than chasing the next hot mutual fund. And what about your cash? Is your money-market fund paying 3 percent when you could be earning 5 percent?
Or maybe your adviser has you in an expensive stock index fund that has zippo chance of beating the low-cost equivalent index fund. The same goes for expensive classes of actively managed mutual funds (often class-B funds) that have an equivalent lower-cost share class.
You always want to ask your planner the following questions:
Research some of these questions yourself and see if the answers your financial professional is giving you gel with what you found.