2005 everything was great.
The stock market was strong. Housing was booming. People had money. People were happy.
But that was then. Today it’s a very different picture.
Ever since Lehman Brothers crashed people have been on edge. And for good reason.
It was the greatest bankruptcy in history – $691 billion.
I describe it as pure insanity. (Enron was a disaster just a few years earlier at $65.5 billion, one tenth the size of Lehman Brothers)
If a company that big could fail, is anyone really safe?
Today it’s Sept 10th, 2011.
People have begun losing faith in their leaders to solve our financial problems.
Riots are breaking out in many Western countries; England being the latest casualty.
Governments are constantly announcing new plans that supposedly “boost” the economy. All the while the stock market is wobbling and the dollar is plunging. If that wasn’t bad enough now inflation is beginning to raise its ugly head.
People are nervous.
They want to invest but aren’t sure where. The way things change so rapidly they just can’t keep up so they turn to financial advisers to help guide them through the economic minefield.
There’s only one problem with that. Most of the financial advisers didn’t see the dot com crash coming nor did they predict the collapse of Bear Sterns, Washington Mutual or Lehman Brothers.
So why would people hand over their hard earned money to these so-called “experts?”
Fear. Many people don’t have enough confidence in themselves to navigate the economic waters on their own.
Personally I agree with Robert Kiyosaki and that each of us needs to take care of our own financial future.
But, I also realize that to do so would require time, effort and money, not to mention the inevitable pain that can come from any mistakes we might make.
With all that is demanded of us today I understand why it is better for some people to go the financial adviser route.
So if that’s the route you choose, here are some things to consider when choosing one.
- Are they available 24 / 7?
- Do they walk the talk? Or are they merely sales people?
- What is their track record?
- Are they upfront and honest?
- Do they tell you “wait for the market to recover?”
These questions will tell you everything you need to know to find someone who you can trust.
With all that is going on in the world and the speed at which things are changing it is essential that you have someone who has their ear to the ground and is able to react to changes swiftly.
Make sure your financial adviser is upfront with you and willing to disclose their own track record. No one has a perfect record but you want someone who is willing to be completely open about their own investments.
Finally, be wary of any financial adviser that simply tells you to “wait for the market to recover.” It is true that the markets will recover in time, the question is whether people can wait that long.
Point in case – my mother who just turned 74 earlier this year, lost 25% of her portfolio in the Lehman crash. Since that time her financial adviser has continued telling her that everything’s fine. And while the total valuation of her portfolio is the same, the dollar has dropped 25%.
This is something that most people overlook. They simply see a dollar figure and think, “hey, I’m not losing any money.”
Sadly in this environment that is no longer true. According to the numbers my mother may have lost 25% of her money, but in purchasing power she has lost close to 40%.
I do believe that, in time, things will get better. But I believe we have a ways to go before that will happen.
With the internet at our finger tips we no longer have to rely on our neighborhood bank’s financial adviser to guide us.
And as I tell all my clients and students, a big part of success is finding the right people.
Consider your financial advisers somewhat of a marriage. Don’t let it end in an ugly divorce; take the time to find the right people for your goals.
After all, it’s your money. And you worked hard for it.