Money Magazine Ask the Mole

10 tips to protecting your nest egg

In his farewell column, the Mole leaves parting words of consumer advice.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By the Mole, Money Magazine's undercover financial planner

the_mole_illustration.03.jpg
The Mole is a certified financial planner and certified public accountant who -- in the interest of fairness -- thinks you should know what goes on behind the scenes in financial planning.
CDs & Money Market
MMA 0.40%
$10K MMA 0.36%
6 month CD 0.39%
1 yr CD 0.70%
5 yr CD 1.55%

Find personalized rates:
 

Rates provided by Bankrate.com.

NEW YORK (Money) -- In the last two years, I've been writing columns as the Mole for CNNMoney.com and Money Magazine, with the goal of helping the consumer make informed decisions, and of making financial planning a profession rather than a sales job.

I have been contacted by the Financial Planning Association and CFP - the licensing organization for Certified Financial Planners. These organizations claim to share my goals, yet I still see a wide divergence between the talk and the walk.

For example, I received an email from the CEO of the CFP Board that stated "Our professional review staff investigates each complaint it receives." I'm sad to say I tested this claim and multiple attempts haven't even been successful in getting an acknowledgement that the CFP Board received the complaint.

If there ever will be a financial planning profession to serve the public, our actions must be consistent with our statements.

Thus, the mole is now bidding you adieu and returning to my burrow . . . for now. But there is something you should know about us moles. Just when you think we are gone, we have a nasty habit of popping up again, and not always in places you'd expect. In a perfect world, it would not be necessary for me to give inside information in an effort to level the playing field between the industry and the consumer, but it's not a perfect world.

Admittedly I'm not as prolific a writer as Jonathan Clements, who wrote 1,009 incredibly useful columns for The Wall Street Journal. But, the 75 or so columns I've written over the last two years have been very rewarding for me to write, and I hope have been helpful for the consumer to build wealth for themselves, rather than for my industry.

To all the planners that sent me those emails chock-full of colorful language, you'll be happy to know that this will be my last Mole column for CNNMoney.com. Before you celebrate, however, I recommend you read on for my parting words of consumer advice.

1. Incentives matter. Nearly everyone I have met in the financial services industry believes they are a very ethical person. Thankfully there are few like Bernie Madoff, who is alleged to have taken $50 billion from investors (including charitable foundations), that now must close up. Yet, as long as money changes hands, we have incentives to transfer your wealth to ours. Stay vigilant, always question those incentives, and keep your fees low. As Vanguard founder Jack Bogle likes to say, and I like to quote, "you get what you don't pay for."

2. Understand your investment strategy. There is a strong relationship between a sophisticated investment strategy and low returns. When it comes to investing, the KISS principle (keep it simple stupid) really works.

3. Never completely trust anyone with your money. This is a corollary to understanding the strategy. Keep your adviser on her toes and keep asking questions. Trust any adviser enough to listen but never to follow blindly. It's a recipe for disaster.

4. If it looks too good to be true, it probably is. Beware of promises of high returns without risk.

5. Put yourself in someone else's shoes. Ask yourself how the party you are dealing with makes money. For example, can an insurance company really pay planners great commissions, cover their costs, make a profit and still pay you market returns?

6. To find our biggest enemy, look in the mirror. Sure, financial planners reinforce our feelings but never forget we are often our own worst enemy. This column has also focused on our human behavior that tends to make us invest in things at just the wrong moment - after they have done well.

7. Never feel too good about your investment strategy. In my experience, it's those that feel the most confident that end up taking the biggest falls. Understand the risks you take and avoid any inner voices that whisper "this has to go up."

8. Ignore the experts. How many of those TV gurus actually predicted the 2008 market plunge? They were all dead wrong, yet still we watch them and follow their advice.

9. We are not all above average. In a market almost completely "professionally invested," I have yet to meet a below average money manager. It's easy to claim we are beating the market if we don't have to show our results.

10. Use some uncommon "common sense." Before you make a major investing move, take a step back, and explain your logic to a friend. That will give you some time to think about the logic of your move (or the lack thereof). What we often think is logic turns out to be driven by how we feel about something and we ignore common sense.

I would like to express my heartfelt thanks to my readers. It has been an honor to write for Money Magazine and CNNMoney.com. As a bonus, here's an 11th piece of parting wisdom - keep reading the great advice these wonderful writers and editors have to give. I know I will.

Have you found a way to pay for your child's college education without taking on too much debt? Did you choose a university based on its lower cost or loan programs, research scholarships, or just save up and pay in full? We want to hear from you. Send your stories to pwang@moneymail.com and you could be featured in an upcoming story. To top of page

Send feedback to Money Magazine
Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Want to buy -- and live in -- a piece of history? It's not that far out of reach. These historic homes are not only for sale, they are incredible bargains. More
5 ways retailers are tracking you If you think pesky salespeople are invading your personal space, check out these 5 technologies that are tracking your movements throughout a store. More
Moto X vs. Droid Turbo: Which Droid should you buy? Motorola has made the two best Android smartphones this year. Here's how they stack up. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.