Money Saving Advice There's more than one way to get most for your money. For more than 20 years, Gary Foreman has worked to manage money effectively. He's been a Certified Financial Planner and Purchasing Manager. He currently edits The Dollar Stretcher Web site and several newsletters. His mission is to help people "Live Better for Less." The Dollar Stretcher: Financial Advisors Question: Hi Gary, A financial corporation offered a class on money and how to properly use it. I sat through their spiel and asked questions. Of course they offer the full array of services from investments to mortgages. All of this sounds good during the presentation. But it has always been my understanding that no one is willing to do something for you without getting something in return. Can you tell me what you think of these corporations and what they are offering? Is there a catch? How can I tell who is reputable and who is just going to take me for a ride? Brent Answer: Brent's right. Generally speaking there is no free lunch. Strangers may be willing to give you something, but they do have hopes of getting something back. Teaching a class or hosting a seminar are common and legitimate ways for financial institutions to find new clients. Back when I was a broker I even taught a few classes. The hope is to impress your 'students' enough so that they do business with you. What do I think of this firm and class? Impossible to say. Because there is no one right financial firm, broker or planner for everyone. Brent's needs are different than mine. So it would be pointless for me to offer an opinion about the class. But with a little help Brent can answer the question for himself. He can begin by deciding what he's trying to accomplish. Some things are fairly simple. For instance, finding a good deal on auto insurance. Other things, like estimating how much money he'll need for retirement, are more complicated. Next he'll need to determine how much he already knows about the subject and how much he's willing to learn on his own. He'll face a trade-off. He can save money by becoming more knowledgeable. But, it takes time and effort to gain that knowledge. Brent will find information readily available. Resources that were only available to brokers 20 years ago are now as close as your computer. He'll also find a wealth of books on all areas of money and investments. One rule should guide Brent when making financial decisions. If he doesn't understand an investment, he shouldn't put his money into it. A careful explanation should allow him to understand exactly how his money is expected to make more money. Next Brent needs to find out how the financial firm will be compensated. Generally, they make their money by charging premiums, commissions and fees. You're used to paying premiums on insurance policies. The premium is determined by the insurance company. It is not a set percentage of the coverage. Typically maximum premiums are regulated, but Brent should shop for the lowest price. On investment products he could run into commissions. A commission is a charge that's added to the cost of the securities being purchased or deducted from the proceeds of a sale. It's not a flat percentage but is related to the amount of money involved. There is no standard commission rate. Full service brokers who provide stock trading advice get top dollar. Less service means a lower price. It's up to Brent how to decide how much advice he needs. Fees come in a couple of different disguises. Some are charged when you take a certain action. A common one is the fee for a bounced check. Mutual funds may charge a fee for trading funds within their family. Typically fees are a set, flat amount and are not dependent on the size of the transaction. Many investment managers are compensated through "management fees". Typically they'll charge a preset percentage of the money they control for making the day-to-day investment decisions. Charges are usually between .25% and 1.5%. The fee schedule for any money manager (including mutual funds) should be readily available. With some mutual funds you'll incur a fee if you sell the fund. Those are known as "12b-1 Fees". If Brent hears the phrase "12b-1" he needs to be sure he understands what fees he could trigger later. The financial services industry is creative in finding ways charge you for their work. So Brent will need to dig a bit to find all the premiums, commissions and fees he could be facing. In some products he'll find a combination of the different charges. Generally the company is required to advise you of all expenses before you purchase. But expect to study some fine print to find them. How can Brent find a good advisor? Going to seminars and asking respected friends who they use are good ways. He needs to have realistic expectations. A broker can't afford to spend much time with someone who's going to generate $50 a year in commissions. And that's ok. For transactions that will generate small commissions Brent should be able to use a discount or online broker. And, for a regular investment program, he might be better off choosing a mutual fund. The good news is that there's plenty of help available for just about any financial situation. Hopefully Brent will get just what he needs for a bright future. Also see: • Understaning your 401k • More of Gary's Dollar Stretcher Columns Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher Web site www.stretcher.com. Contact Gary at gary@stretcher.com. You'll find hundreds of free articles to save you time and money. Visit today!