Uninformed investors

Investors who abdicate responsibility for overseeing their wealth usually end up unhappy and often un-wealthy. But we know that no one reads instruction manuals; not for cell phones, not for  investments. The fiscal health of an investor is in peril. 

Solution: Find university courses or organizations that have engaging and interactive formats, steer clear of education that is offered by those who have something to sell. The point isn't so much to learn how to make day-to-day investment decisions as it is to learn how to manage an investment advisor.

Complex distribution arrangements

How can an investor know that whether he's getting good advice or just earning commissions for the advisor? Only last year did 12-b-1 fees - annual marketing  charges on mutual funds - finally face scrutiny by the SEC. 

Solution: Insist on full disclosure on compensation and distribution fees. The investor may find that some suitors lose interest, but those that stick around have at least shown a willingness to be transparent in their dealings with clients.  

Misleading online resources

When "wealth management" on Wikipedia is chocked full of brokerage-and-investment firm editorials and other self-serving product descriptions, something is amiss. When certification is an alphabet soup no one dares eat, much less explain, time is ripe for reform and simplification.  

Solution: Stick with sites that are more substantive in content, more peer-to-peer oriented and that feature offerings beyond the sponsoring firm’s philosophy.

Overly complex regulation

If banks, brokers, investment advisors, and financial planners are all doing the same thing, why is the regulation different and certification of each so varied? Does acting as a fiduciary mean my advisor will do as I say, even if I am about to make a terrible investment decision? Will my advisor risk my wrath and refuse to let me invest as I wish to? 

Solution: Understand what it really means when an advisor acts as a fiduciary, including at those awkward times when the advisor steps in to prevent the investor from making emotional or risky decisions.  

Litigious society

It is no surprise that investors get angry when they feel they have been betrayed or cheated. Recourse is so apparent and easy. 

Solution: Perform due diligence, specify the hoped-for-outcome before hiring the advisor; it weeds out the scoundrels.
 

Advertising sells

Not too long ago CNBC ran ads for Stanford Financial that tempted the viewer with promises of solid and professional advice. At the time few , viewers had ever heard of Stanford. Now most know that the firm's founder is in custody and accused of cheating his customers out of billions of dollars. 

Solution: We all love the Aflac duck, but we should ignore most advertisements or at least be on guard against putting much credence in them.  

Leadership

Who leads the investor "movement" that would seek better outcomes for the investor with more honesty and transparency? Even AARP now sells its own insurance program. Few, if any, investors, however, would wish for a Congressional panel to determine what is good for all investors. 

Solution: Self-awareness is critical, and the steps necessary to reach a more successful outcome in investments do not constitute a ‘movement’ but rather a very personal game plan. Leadership begins at home or at least in the classroom, not the boardroom.  

Charlotte Beyer is the founder and CEO of  the  Institute for Private Investors, a New York-based education and networking resource for ultra-high-net-worth families.