Advisor or not, You're Responsible

Today financial advisors can be found in any city, in all shapes, sizes, and price ranges. Some may be worth their weight in gold; others might not be worth wrapping in tin foil. But regardless of the advisor, you should remember one thing: only trust what they say if you completely understand what it is that they're saying and if you know how every decision will affect you.

This is not to say that advisors aren't looking out for your best interests; as a matter of fact it's quite the contrary. The vast majority of advisors are very professional, and they want to help you. But advisors don't always understand each particular situation, and they are not always right. For instance, financial advisors may assume that if we want to buy a house well above our means, we know what we're doing. We, on the other hand, assume that our advisors will tell us if we're about to do something stupid.

Financial advisors generally fall into two categories: fee-based and commission-based. If you're just beginning with investing and financial planning, you'll probably be more comfortable with a fee-based advisor. That way you'll know what the advice is costing you as well as be assured that the advisor has no ulterior motive to sell you unwanted or unnecessary products. Of course, always be sure to ask for an estimate and term sheet before you agree to any consulting relationship, whether it's with a solitary advisor or an investment firm.

Incidentally, it's also wise to keep in mind that when you receive mailings or electronic statements, it's up to you to check the activity section of those statements regarding any investments that you have. This has become more and more important because investment firms increasingly are taking the stance that any mistake not caught within thirty days is no longer their responsibility. This means that an inaccurate entry of $1000 instead of $100 could end up being your tough luck, even if it was the investment firm's error.

No one cares as much for or has as vested an interest in your financial future as you do, so if you're using an advisor, whenever a decision or piece of advice is offered to you ask this bottom-line, rubber-meets-the-road question: "Is there anything about this decision that you'd want me know if I was your brother (or father, mother, sister, wife, husband, son, Aunt Agnes, etc.)?" Then be quiet and listen intently to his or her answer.

The responsibility is on you to make sure that your money is managed properly and that you have the appropriate types of insurance, investments, and retirement plan. You need to be knowledgeable of and involved in the big-picture plans as well as the mundane details that will get you where you're looking to go. For example, you need to know exactly where your money is invested and what type of return it's earning. You need to know the details of all your insurance policies. And you need to know your credit scores and what you owe on each of your credit accounts. In other words, you need to be fully aware of your entire situation. Regardless of whether you employ an advisor or not, the responsibility for your financial well-being ultimately rests with you.