Top 10 Tips (Secrets) Your Financial Advisor Won’t Tell You

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Although you might believe you know just about everything about finances from your advisor, there is more behind the curtains. Secrets that are kept by advisors since most of the time it works against them if you were to take advice.

Financial advisors are also working to earn an upkeep and are therefore likely to also put their interest forward, sometimes at your expense. Other times, it might not be within their scope to advise you as such. Here are some of the best financial tips that your advisor won’t tell you;

Hiring a Pro Doesn’t Mean They Are the Best

First of all, not everything needs to be done by a professional. There are some things you are better off doing by yourself especially involving taxes. People advertised as pros are not always the best in the field. Aside from false advertising, the experience should matter, and you should be wary of your hires.

You should research and know the difference between pros. CPAs (Certified

Public Accountants) are certified by the state for auditing, accounting, consulting, and taxes. Certified Financial Planners (CFPs) and Enrolled Agents (EAs) are licensed and certified as well but have specialized in a narrow area. Sometimes, it is better to work with EAs.

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Do Background Research

It is important to do your own research since some people might be falsely claiming to be financial experts. Their certifications could also be bogus. You can check with the Better Business Bureau to see if there are any legal issues with your advisor or firm. Use the Certified Financial Planner Board of Standards, Inc. to check the validity of the license of an advisor.

Research deeply about your advisor before hiring them to protect yourself. Ensure that you confirm that your advisor is not just certified but has valid certification. Once you are knowledgeable about the different experts, you can make a choice on who will work best for you.

Financial Advisors Give Discounts

Your financial advisor might not tell you this, but some of them give discounts. One of the best ways you can get an advisor is through referrals from friends and family. That way, you can get someone who has been tried and tested by people close to you.

Advisors give discounts to referrals from family and friends, thereby reducing the fee. However, you have to ask in order to get the discounts. Such referrals will land you an advisor with a good reputation, and you can easily establish a good relationship with them. So don’t be shy and ask within your circles for some referrals.

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Annuitize Your Pension (One of the Best Tips)

Although you will be generally advised to avoid annuity, you should annuitize your pension. Usually, for pension, you get two options.

The first one is to get a lump-sum distribution while the second one is to annuitize it, thereby earning you a monthly income for life. There are several factors you can consider in deciding what option works best for you.

They can include life expectancy, rate of investment return, and your demand for liquidity. Most advisors will suggest you take the lump-sum distribution since they also get paid from the money you receive.

Annuitizing your pension will also save you from quick spending and help you better with planning for your retirement. An assured monthly income can be more stable than investing the funds in other prospects.

You Should Delay Getting Social Security

A delayed Social Security can earn you a guaranteed investment return of 8% on the Social Security payment. This is one of the best rates and is not that common on many investments. Delaying your Social Security will also force you to fund your living expenses from elsewhere, mainly the investment portfolio.

The reason financial advisors don’t tell you this is because they charge a percentage of assets under management (AUM). They will advise you to take your Social Security immediately. Don’t lose out on a guaranteed investment return of 8%. Organize your investment portfolio instead and find a way to support your expenses.

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Advisors Will Put Their Interest Before Yours

A study has noted that a very high percentage of Americans believe that their financial advisor always has their best interests in mind. The financial decisions an advisor will make are more likely influenced in how much they will earn rather than what you will make.

It is important to know that advisors are allowed to put their interests before yours. Unlike the case of a fiduciary, some advisors might sell you an investment that will cause you losses but makes them money.

Advisors can sometimes be more interested in the commission they make rather than making your life better. To prevent this, hire a fiduciary since there is a requirement that they make their investment portfolios public.

Stocks Are Less Volatile Over Long Periods

Despite the popularity of stocks, graphs have shown that they are not safe in the long run. There is a common misconception that the riskier an investment, the more profitable it can be. This is false, especially with stocks. Over long periods, stocks provide a fairly stable yield, thereby earning you the same returns as less risky investment options.

Over a period of 20 years, stocks can perform similar to safer options but with the added risk of you losing all your money. The belief that stocks provide high returns, in the long run, is not always true, so you might be better off picking a safer investment option.

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Avoid Guarantees and Promises

One thing you might not know about financial advisors is that their knowledge on the market is about the same as yours. Unless they are participating in insider trading, they cannot predict the market. So you should be wary of anyone who promises you guaranteed returns.

There are very high chances that they might be selling you something. The market is volatile and has diverse factors that can affect it. So if you get an offer or investment advice that sounds too good to be true, it is. Don’t be swayed by promises and guarantees of high returns, and invest wisely.

Pay Your Debt and Stay Out of It

An advisor’s goal is to grow your investment portfolio as it also keeps them paid. Thereby, they are not likely to advise you to pay or pre-pay your debts as it might affect the investments. They will be more concerned with maximizing your investments and minimizing the risks.

If your investment is on track, you should pay your credit card debt and/or car loans. Depending on several facts, including investment allocation, risk tolerance, rate of interest on the debt, it might make sense to pre-pay the debt. It might not align with the interest of your advisor in growing your AUM, but you should consider paying your debt.

Diversify Your Retirement Income

Basically, don’t put all your eggs in one basket. There are several ways to invest aside from the stock market. It is very beneficial to have a diverse source of income for your retirement. This can range from rental property, small business, self-employment, or pursuing a hobby.

This has its own set of challenges but pays off in the long run. This advice is hardly given by many advisors since it compromises the AUM that they are managing by lowering it.

Your advisor ultimately aims to keep your AUM high and stable therefore, they will not recommend anything that takes money away from it. Diversifying your retirement income can increase your income and lower risks as well.

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