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Your Money: Are You Getting Good Advice?
(ARA) - When Willie Nelson discovered he owed $2 million in taxes, his lawyers and accountants had a recommendation. They advised him to borrow $12 million, invest it in cattle, and erase his debt with the tax write-off.
Unfortunately, the IRS didn't allow the write-off. Nelson found he now owed close to $30 million, and the government ended up confiscating most of his property.
Oh, to have the problems of the rich. Most of us don’t have to worry about managing millions of dollars, but ordinary people could learn something from Willie Nelson’s mistake.
“It’s sad, but it’s not surprising. Many people -- most people -- never organize their financial lives or worse, give up control of their financial affairs to someone else,” says David Garner co-founder of The Motley Fool, a financial Web site dedicated to educating ordinary people about money. “We continue to be concerned about how little the average American knows about what is happening with their money. Think about it -- who has your best interest at heart more than you do yourself?”
Whatever the size of your bank account, the experts recommend taking some time to educate yourself about your finances, even if you do use the services of a financial planner. Those who take time to organize their financial lives are much more likely to achieve their goals. But few of us know how to sort through the daily avalanche of financial advice that comes our way for good, unbiased information.
The Motley Fool offers an option for investors: a personal financial advisor that doesn’t depend on commissions and that can help with ALL aspects of money management. Called TMF Money Advisor, the service is designed to be roadside assistance for any financial problems or questions you encounter and has been rated “the best all-around product” by Bloomberg News. The range of resources includes an unbiased, independent financial advisor to phone when you need help, uncomplicated interactive tools for creating a financial plan, and ongoing educational opportunities. And, if you’re still skeptical, the Fool applauds that and rewards you with a no-risk 30-day free trial.
But, before you get professional financial advice, The Motley Fool recommends doing some research on your own, and keeping the following factors in mind:
Know how your financial advisor makes money. The vast majority of financial advisors are still paid, exclusively or partially, by commission. Mutual funds, annuities or cash-value life insurance policies carry sales commissions. You pay commissions when you buy and sell stock. Be aware of a potential conflict of interest. Ask advisors about their commissions.
Be wary of advisors preoccupied with hot stock picks, unless you’ve asked for them. Good advisors always put the basics -- such as cash flow, debt management, and insurance -- before investment advice. All specific investment recommendations should fit into a larger framework built around your financial goals.
Any discussion of investments should include the risks. If your advisor promotes any investment as a risk-free “sure thing,” find another advisor, especially if the promised reward is very attractive. If it sounds too good to be true, it probably is.
Stay involved. Don’t turn your hard-earned money over to someone else and forget about it. Even if that “someone else” is a beloved spouse or an old friend of the family, it isn’t safe to be in the dark. You have a right (and an obligation) to understand what your advisor is recommending and why.
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