A Checklist: How to Weed Out Questionable Practices

1. National chain? There are some benefits to working with a bog box national chain. It is a different style than a private practice. Some investment clients tend to assume that there is something prestigious or maybe a sense of stability to invest only with large national investment firms. Or maybe to assume they have access to inside intel that boutique firms are not privy to. The question to ask is, does it add tangible value or is it a ‘flash in the pan’ effect? So, at best, these things are not a deal maker or breaker. It’s simply how you prefer to do business. Some people like their calls to be received by big call centers and some people like to have a deeper connection to trusted advisors. Some people don’t know what a ‘trusted advisor’ is or how to find them; the best way is to ask around your circle of smiling friends. Some people like working with an independent adviser that is not pushing product to win the next sales competition in the office.
2. Do you get the feeling that a firm is simply pushing product? Reputable firms use a more holistic approach that looks at the big picture of where you are, where you want to be and how to get there with the least amount of risk. Then and only then, do they see what products might best be used to satisfy the whole.
3. 'Guaranteed'.  This word comes with a cost. You need to ask yourself a very important question here. Be careful about your answer because you will surely get different results. “Are you trying to grow your money (invest) OR not lose your money (save)?”  Notice there is no typo in the question that left out an ‘and’. It is simply ‘OR’. If we had our druthers, our choice would be to grow our money without any risk of loss or volatility. True investing, however, includes the management of risk as an inherent part of the process. In other words, if you’re not taking any risk then you’re not really investing in the purest sense.(Technically, you cannot avoid all risk even when you’re getting told something is ‘guaranteed’; specifically when we consider the loss of purchasing power when your returns can’t even surpass inflation over time.)  Products that are tangled up in the words ‘guaranteed’ cannot be defined as an ‘investment’ in the purest sense. There IS a place for them on rare occasions so we cannot ever rule anything out as a useful tool. But if you are getting a sales pitch and that is the main focus, you should consider asking around for a good second opinion.
4. One year advice. Accounting practices and protocol can narrow our decision-making processes into 1-year windows. This is certainly better than a void of decision-making. But optimal advice inherently involves long-term thinking. Western-ized thinking is generally short-term. Eastern mindset is more commonly in the tens and hundreds of years. Westerners tend to be more shaken and stirred up by day-to-day events. Some might even say that we have become increasingly hyper-sensitized. But true investing begins to think in tens of years, increasing in potential as the window and vision of the thinking (the plan) increases. So, many can get caught up in the short-term and miss out on the maximum potential.