Misconceptions about Financial Planners

Some people, when they learn I am a financial planner, ask if I have any good stock tips. My usual response of "sure, buy low and sell high" is good for a chuckle, but the question highlights some misconceptions about what a financial planner is and is not.

As a financial planner, I am not the person who is picking the actual securities. I do not profess expertise and market insights to pick your individual investments. Instead, I help my clients find the best people to do that for them. I encourage my clients to purchase appropriate mutual funds or managed account programs and I walk them through that selection process.

To do that, I identify the key investment selection criteria. As part of the planning we discuss risk, reward, time frames, and investment experience. Armed with that knowledge we can build a portfolio to maximize our probabilities of achieving your goals.

Once we have selected, I monitor the performance. We have to use a couple of different measurements in order to make the best evaluation.

• How has this investment done in comparison to other similar programs (peers)?
• How has this investment performed relative to our objectives?
• Have the rewards been worth the risks?
• How does this program fit in with the over all plan?
• If we were to change directions with this money, which way would we go?

Sometimes it is okay to underperform or accept less than desired results. If your goal was to earn 8% a year and you only earned 3% last year, wouldn't you still be thrilled if "the market" lost 10%?

Lastly, when it is time to make a change I help my clients evaluate alternatives. My clients and I regularly sit down and review their finances against their plan. Sometimes their goals change and sometimes a program just does not work out as we had hoped. Regardless, sometimes making a change is the most appropriate course of action.

What about those hot stock tips? Caveat emptor. Be sure to do your research on any investment. If it sounds too good to be true, it probably is. If it were easy, everyone would be rich.

• Hot Investment Tips by E-mail @ Where Does Your Money Go?
• Beware of stock tips in email and text messages @ Security Tips & Talk

Note: In looking for these other blogs to link to there were many, many more which offered hot tips. I thought about linking to one or two as bad examples, but I do not even want to give them that much credibility.

Comments

[Carl Lingen]

Art:

When looking at company 401(k) plans, what is the range of investment options employees should have?

If an employer only offers a few options can the company be liable for fiduciary responsibility?