Monday, September 13, 2010

Choosing a financial adviser. Why women have different needs

Over the years, I've worked with a variety of financial advisers and brokerage firms to manage my investments, retirement strategy and savings. These experiences have left me with the concern that gender differences in communication can be a challenge when it comes to making good decisions.

A recent article in the Wall Street Journal titled, "How Retirement Shortchanges Women" by Reshma Kapadia under scores that concern. Frankly, my trust level with brokerage firms and financial advisers of all stripes has steadily declined in the past 10 years. I base this declining confidence not only in my own experience but that of others. Let's take my mother's situation, for instance. After age 80, my mother was sold three annuities by two separate brokers. She really didn't know what she was buying nor has she benefitted one cent from the investments. Had she been more confident, less trusting and asked tough questions, she might have avoided wasting what totaled almost $100,000. Keep in mind that brokers earn large up-front commissions on the sale of such annuities.
Basic rules of investing
Neither did one of her brokers work with my mother to keep her stock portfolio balanced. A basic rule of investing is that nothing in the portfolio should represent more than 10 percent of the total account. That way if something crashes, there's some diversity to protect the investor from a big hit. In my case, the negatives have been more about stock investment advice. My over all stock picks have produced better results than those of my broker despite the research resources at his finger tips. Neither has he been willing to reinvest dividend money into stocks that I already own. That has been an ongoing bone of contention. He says I should be using the cash to buy other stock. I say that automatic reinvestment is painless and builds on a proven track record.

Visits to the offices of CPAs have for the most part been more expensive than they were worth. Neither have most of these professionals been forthcoming when it comes to their fees. An hour consult that was supposed to cost $150 turned out to be $350 because of the "additional" time spent preparing for the consult. My mother's CPA charged her $1,200 to take two phone calls and write a letter to a bank.

Yes, times are tough, but do these people deserve to make money on my money? No.

So why is it harder for women when it comes to those important conversations with investment advisers.
Kapdia reports that "conflicting styles of communication may have a lot to do with why women feel ill-served."
We want advisers who will look at the whole picture, provide us with choices and explain how the goals can be met. We also want advisers who are honest about how they earn their money and honest about the pitfalls of the products they are selling. We want people who put things in writing and provide a sense of confidence that they are on our side.
A recent survey by financial-services company MassMutual found that women's retirement accounts were, on average, just two-thirds the size of men's. What's worse is that we live longer and need more money than men for a comfortable retirement.

"Millions of women are going to lose their standard of living unless they take hold of the situation," Cindy Hounsell, president of the Women's Institute for a Secure Retirement told the Wall Street Journal.


How do you get paid?

What’s your background, experience?

What’s the strength of the company you work for?

What do your clients say about you?

What are your checks and balances?

Can you put your proposals in writing?

What are the potential pitfalls of the investment products you are offering?

What do other professionals have to say about you?

What’s your gut-level comfort with this adviser?

When you meet with your adviser do you come away feeling good about what you’ve learned, where you’re headed?

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