If you'
re like most
investors, you find today's
investment climate more
complex than
it was even a few years ago. Let's
face it, with more than 8,000
mutual funds to choose from, and a myriad of
stocks,
bonds,
annuities and other investment
products available, it's difficult to know where to begin. In
addition,
developments around the world have created new
markets for
goods and
services, which in turn have generated exciting new investment
opportunities.
Using the services of an
objective financial professional may be the key to sorting out all of these
issues. A financial professional can assist you in
building an
investment strategy based on your personal
goals and
tolerance for
risk.
Compensating The Financial Professional
An important
issue you
need to
address is
how the financial professional is to be compensated for his or her services. Financial professionals may be compensated in a number of ways. These include through
commissions derived from the
sale of
individual financial products, by a
set fee for
service, or a fee assessed annually based on a
percentage of the
value of your
account. Financial professionals
charging a fee based on the value of your account are
able to provide these services through
programs known as managed
money or fee-based advisory programs, which are becoming very popular with today's investors.
Fee-based advisory programs allow a financial professional to
offer clients professional
portfolio management using stocks, bonds, mutual
funds,
variable annuities or some
combination thereof. The
portfolios may be managed by the financial professional and the
client using a pre-developed
platform, or
may be given to a
third-party firm to manage. One of the many advantages of fee-based advisory programs is that they allow you to fully utilize the
concept of
asset allocation. By definition,
asset allocation is the apportioning of investable funds among a variety of
asset classes with each
class reacting differently to similar
economic events. The strategy's objective is to offer more opportunities for potential
growth in some portion of the
portfolio in changing
economic environments.
Some additional
benefits may be
consolidated statements, greater
objectivity by your
advisor and a higher level of
quality service.
You might find that the fee-based approach to managing your personal
investment portfolio offers you a more palatable alternative to the traditional commission-based
method. If fee-based advisory programs sound interesting
The author is a CLU and ChFC designee, a Registered Investment
Advisor and registered representative of Jefferson Pilot Securities Corporation, member NASD, SIPC.
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