31 October 2012

How to protect your money

We repeatedly warn against the dangers presented by investment scams. A few simple rules (Marketwatch) should be enough to weed out the most obvious frauds but that leaves the question of how to make sure that investment advice you get from reputable firms is as good as is promised in the glossy brochures you receive from them. A key rule should be to always ask for their (published) performance record and make sure that the way your portfolio will be managed in way so that it will match the performance of the model or master portfolio. All-too-often individual advisers are left to handle the client's portfolios which means that different clients get wildly diverging investment results even as they are clients of the same firm. When the adviser gets hefty bonuses based on the commission he generates from the customer account there is an extra risk that your interests will not be served in the best possible fashion. Even worse is a situation where the financial adviser consults with you before making any investment decision. While this may flatter the ego of many a client it also gives the adviser an escape when things turn out badly. He will put the blame on you and 'the market' while happily pocketing his 'advisory' fee.