There has never been a point in time where the market has been this high and interest rates have been this low. Normally, there is not that big of a disparity between the two, so people are really unsure of where to make investments.
If they invest in the stock market, they will be getting in at an all-time high. Bonds are usually regarded as a safe hiding place—but that only works well if interest rates are starting to rise. Fortunately, Dino LoPresti of LoPresti Financial Group has offered some advice regarding how to protect and wisely invest your money.
- • It is important to understand that the vast majority of investments are sold on a commission basis. There is normally some kind of conflict of interest in this type of scenario. For example, let’s say you come in with $100,000 to invest. If I am a commission advisor and I offer you an investment with a six percent commission, that would be $6,000. There might be an investment that is much better for you but only pays me one percent, or $1,000, but with major brokerage firms you will not hear those options because they are not as profitable. They essentially believe that if you have the money needed to make an investment, it is a suitable investment, even if it is more beneficial to them than to you.
- • The best option for investing is to work with a licensed fiduciary. Licensed fiduciaries by law act in a person’s best interest. They cannot sell an investment that pays a commission out of a client’s money. These places should have what is called a “Series 65” license. We are very upfront about being a licensed fiduciary, because very few advisors have a fiduciary license. But these are the types of advisors that are best to work with, as they get audited and are bound by law to do what is best for their clients. The first question to ask is always, “Are you a licensed fiduciary?”
- • What is unfortunate is that some places that are commission-based will describe themselves as a fiduciary with a Series 65 license, but they may also have a license to sell investments on a commission. That is pretty disingenuous, though not an uncommon practice. The only way to ensure that you are working with a true licensed fiduciary is to ask, “What kind of licenses do you have?” If they only have the Series 65, then they are a licensed fiduciary and will act in your best interest. If they have anything else, they may also work on commission and would not be your best option to pursue.
- • Also ask an advisor, “Are you paid more for recommending one investment over another?” If they say yes, then they are acting in their own interests and not in yours.
- • The final thing to ask a potential advisor is, “What is your commission?” Ask to see that in writing. With fiduciaries, before someone becomes a client, they will initial in three different places and sign a document that clearly states the fee so there are no surprises. It is very straightforward, whereas with brokerage firms you may encounter hidden fees.
When it all boils down, investing is about making money. It is important to ensure that you work with an advisor that knows what is best for you and wants to help you succeed. The best thing to do is ask questions along the way, and to make sure that you are completely comfortable with the financial group you choose to work with.