What to Ask Your Financial Advisor?
I truly believe the next quarter or two of the American economy is going to be very ugly. The primary reason for this is that I think mainstream America (Main Street) has finally realized how bad the economy truly is and that it is going to actually affect their lives directly. Consumption is going to dry up, people are going to lose jobs, and we will officially and clearly go into a recession.
One indicator for this realization is the amount of people that have approached me over the last two weeks asking for advice on what to do with their savings. Unfortunately for them, I am not an expert in this area nor am I a financial advisor. I appreciate the fact that they think I may know more than the next guy in regards to Personal Finance, but in reality my training is in trading Asian equity derivatives…not exactly a perfect overlay to those with savings invested in US publicly listed companies.
However, fortunately, there are people out there smart enough to offer good advice. One of those is the Big Picture, who offers a list of “Questions for your Financial Advisor“. Here are a few:
- What were your adviser’s expectations for the stock market’s returns in 2008 and how did these expectations compare to the actual results?
- Did your adviser change his strategy as economic and financial events changed? If he didn’t, why not?
- Ask your adviser whether he “eats is own cooking” — that is, did he invest along with you in the same investments, and are both of your interests aligned?
During these last two weeks, things have changed even more. Now we must take into account not only what our savings are invested in, but also where they are invested. Be sure to check the FDIC web site often to stay up to date on which banks are on their “Troubled” list, which have been siezed, and any other high priority press releases from the nations bank insurer.
Other than that, I suggest reading the most recent news available on the web on your bank. And watch its stock price. If the price begins to plummet, it might be time to take a few dollars out to protect that cash. I’m not suggesting a run on the bank, especially for anything less thatn $100k in an FDIC-insured bank, but we all have to be smart and careful in times like these.
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