Death of Dividend: Here’s How to Recharge Your Passive Income Strategy

Death of Dividend: Here's How to Recharge Your Passive Income Strategy

The economic devastation caused by Covid-19 has been unprecedented, with most countries across the world only just starting to recover from the unforetold effects of the virus. One of the more prominent financial casualties of the pandemic has been the domain of “dividend-based income schemes,” often relied on by entrepreneurs as they seek to achieve the best of two worlds — capital appreciation of an equity investment with a regular cash flow customary for a fixed income instrument. This is a particularly convenient strategy for those heavily invested in their businesses while needing a regular income stream to fund their day-to-day expenses.

After a dire year for corporate payouts, where an increasing number of multinationals will have to cut or cancel their dividends altogether, a whopping 75 percent of all UK-based firms have already had to resort to such measures. To put things into perspective, this figure was only 40 percent during the last major dividend crises — i.e. the 2008 credit recession.

But dividends have been on the decline for decades, falling from grace since the 1990s when the average payout ratio for S&P 500 companies fell to 30 percent from a previous fluctuating average of 40 percent to 60 percent between 1950 and 1990. Additionally, as per data recently made available by global financial administrators Link Asset Services, one can see that during Q2 2020 alone, the total amount paid in dividends by UK companies fell by 57.2 percent to £16.1bn, signalling a cut of almost £22bn. Covid-19 has merely accelerated the inevitable: Cuts were coming anyway.

What’s causing this to happen? What lies ahead?

While there are many nuances to why dividends are going out of fashion, one of the main reasons at the moment is the need for companies to hoard cash due to today’s uncertain economic climate. Secondly, dividend receipts are incredibly inefficient and cumbersome when it is time for a person to file their taxes. Lastly, an over-reliance on dividend income tends to signify an absence of alternative attractive investment opportunities in the market.

The lock downs have also spurred on the aforementioned slew of dividend cutbacks, which  are likely to continue well into the future as companies start to pay off vast debts they may have gathered during the crisis. As a result, it is anyone’s guess as to how much more debt most companies will have to accrue, especially as lockdown restrictions continue to be implemented across the globe.

Alternative investment strategies worth considering. 

For entrepreneurs who rely heavily on dividend-based monetary streams, it may seem as though the ongoing pandemic has turned their world upside down. Since there is so much economic uncertainty across most markets today, individuals should maintain diversity across their portfolios, spreading their investments across a variety of different regions, sectors, and asset classes. For example, dividends emanating from companies affiliated with the defense, healthcare, and technology sectors have faced little to no pressure throughout the coronavirus crisis. They may, therefore, be potentially lucrative investment avenues.

Similarly, forward-looking entrepreneurs may choose to switch up and modernize their strategies by considering inflation-beating assets such as cryptocurrencies or even precious metals like gold. While neither Bitcoin nor gold pays any dividends, it’s always possible to sell some of your holdings during bull cycles in order to lock in profits, thus allowing owners to generate steady cash streams as and when required.

People might even want to consider different asset classes such as high yield and emerging market bonds that can routinely deliver gains ranging between 3 percent to 4 percent, which, in this low-interest-rate environment, could be quite an attractive option for many. Other options include ‘investment trusts’ since they can borrow from or use their ‘revenue reserves’ – which basically comprise of the dividends they receive any given year — allowing their backers to draw steady income streams even during leaner periods.

Lastly, micro-investing is another untapped domain that is fast gaining prominence. It affords entrepreneurs the ability to maximize their money’s growth potential while giving them a good shot at beating many common inflation-related woes. In fact, over the course of the last few years, a number of digital platforms such as OSOM Finance, Acorns, and Robinhood, have made the process of micro-investing extremely streamlined and hassle-free for those interested in exploring this space.

The new normal and the adverse effects of low-interest rates. 

With interest rates being cut by central banks globally, it has become easier for people to borrow money than ever before. For example, in the wake of the coronavirus pandemic, many Central Banks cut interest rates to essentially zero in 2020, primarily as a means to shelter their economies from the effects of the virus.

While on paper this may sound good because reduced interest rates can increase consumer/business expenditure, enhanced market investments, etc., it can also result in inflation and the creation of a liquidity trap which can severely devalue one’s local fiat currency.

For example, following the 2008 credit crisis, the Fed lowered rates and injected money into the economy to increase economic activity. However, the move created a liquidity trap — wherein people started to hoard cash in fear of another market crash — and as a result, the American economy failed to expand despite zero/very low-interest rates.

Low-interest rates can reduce one’s spending power and have an adverse impact on a country’s middle class because when interest rates are lowered, unemployment rates can increase since companies can lay off well-paid individuals in favor of contractors, temporary/part-time workers at much lower rates.

This, in turn, facilitates a wage decline across the board, creating a highly undesirable social environment wherein individuals have to reduce their standard of living since they can no longer afford to pay for even essential goods and services.

One final hurdle that entrepreneurs can face whether they are looking to make income off of dividends or not: Capital. The alternatives outlined above, whether cryptocurrencies, high-yield bonds or even micro-investing, are all far less lucrative if an individual doesn’t have a notable portion of money to stake in the first place.

This essentially creates a barrier to lower class citizens who may have little or no spare cash and are living paycheck to paycheck. While new services and technologies are certainly lowering the barrier for entry, realistically valuable returns are near impossible without sizable upfront investments, particularly for the instruments with a fixed income component.

Anton Altement

 

By: Anton Altement Entrepreneur Leadership Network VIP

Source: Death of Dividend: Here’s How to Recharge Your Passive Income Strategy

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I share a few warning signs that a dividend stock is going to get cut and how you can avoid losing thousands in dividend investing. Watch another Investing for Beginners video here: https://youtu.be/IGVfXwVP8Ws SUBSCRIBE to start the financial future you deserve: https://www.youtube.com/channel/UCbKd… #DividendStocks #Stocks #Investing
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What Is Management 3.0 & Why You Should Pay Attention To Energize Your Teams

What Is Management 3.0 and Why You Should Pay Attention to Energize Your Teams

Jurgen Appelo is a software engineer, trainer, entrepreneur, author, speaker and traveler, who has been driving agility in companies. One of his works, Management 3.0 , condenses a team management methodology so that they can survive amid chaos and fragility.

This model, based on Edgar Morin’s so-called complexity theory, is based on the notion that a system – a company, a government, a project – is not feasible to analyze as a mere sum of its component parts; rather, it is the relationships and interactions that give it meaning and momentum. To graph this, imagine a network, with interlocking threads connecting each component. These threads are the facts, actions, decisions, and interactions that make up the world.

That is why management has been seen for several years as a system of networks and people, of dynamic relationships, and not only about areas or departments, profits and processes. It is a living system, not machines that systematically replicate the same result.

Principles for energizing and developing talent

In its 3.0 model, Appelo shares several principles that serve to support the work of leaders and teams in today’s changing world. Here are some of them:

1. Energize people

To achieve this, it is necessary to know what it is that motivates them and that is part of their life purpose: the more consistent it is with the purpose of the organization, there will be a greater individual commitment and team cooperation. For the psychologist and professor Edward Deci, there are two types of motivations:

  • Extrinsic: stimuli that are provided from outside the person (for example, a performance bonus, constant congratulations from the leader, etc.).
  • Intrinsic: those stimuli that are internal and relevant to the person, even when it is not their primary goal (for example, a project in charge). However, if you find a meaning, a why in what you do, you connect better and there is your own reward.

Author Daniel Pink offers a similar look at intrinsic motivation in his book “Drive”, where he affirms that most people are moved more by this type of impulse than by extrinsic. In other words, in the end and in essence, people care more about satisfaction than external rewards, although they should not be lacking, and he explains that there are three factors that new management leaders need to take into account to boost talent: mastery -the desire of each one to be better in what is important to him-, autonomy -the impulse to guide his own life-; let me mention self-leadership-; and purpose – intention to serve something greater than ourselves.

2. Empower teams

To achieve this, the author of Management 3.0 points out that it is entirely possible for each team to organize itself, if it has the confidence of the leaders.

At this point, it is essential that those who lead people focus on doing their job and not on micro-management and that teams participate in collective decisions on relevant issues. In addition, it is necessary for everyone to understand that they are part of a joint system, and not the mere sum of individualities, and that the knowledge of market needs is not in the hands of a single person, but that there is a broader perspective of their needs.

To empower, there are four lines of action that are strategic to generate relationships of trust:

  • Let the leader trust his team.
  • Let the team trust their leader.
  • Let team members trust each other.
  • Let the leader trust himself.

3. Development of skills

We already know that it is difficult for any company to achieve results if its members are not trained; and the leaders are responsible for enabling the conditions for this process to take place. Some ways are:

  • Leading by example: living what is preached.
  • Promote self-learning: appreciate personal maturing time.
  • Coaching and mentoring: as transversal support and support tools throughout the organization.
  • Training and certification: to raise standards against the competition.
  • Collaborative learning: internal development, where everyone learns from each other.
  • Learning from error: doing retrospectives and tests in controlled environments.
  • Measure the results: feedback in the shortest possible cycles; use of keeping metrics on information radiators; indicators agreed between those who participate.
  • Smaller teams: the author recommends no more than 10 to 12 people.

4. Improve everything and observe the team environment

It is key in the management 3.0 model to focus on real continuous improvement, for which it is necessary to facilitate change processes and model the natural resistance that may appear.

Some suggestions for leaders are to observe the team environment, what they need, and let it be known that you are available; find cracks or faults and go to their roots to promote solutions that the team implements; define clear and specific goals and have great communication skills, a key factor of every good manager.

Also, incentivize defining small victories or milestones that energize people; review achievements and not just failures; and it is also essential to recognize people.

The implementation of this leadership style implies a cultural change in companies that is not necessarily rapid, although it can be agile, if you have the conviction and vision to carry it out.

Ultimately, it depends on each company how far they want to go and on each leader, how much they want their teams to develop. Two questions that only they can answer.

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Many teams use Mind Maps to explore certain topics. Similarly you can use Personal Maps to explore your team itself. Personal Maps facilitate team collaboration and bonding in a rather distant world. With this video, you will learn how to use Personal Maps to break down the barriers of cubicles and longer distances, and then you may even learn how silly you were when you thought you had nothing in common! Here you can learn more about this Management 3.0 Workout: https://management30.com/product/work… Here’s a trick, instead of presenting your own, spark conversations by presenting each other! What are you waiting for? Try this 7-minute exercise out and tell us below how it went!
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How To Invest $100,000 For $940 Per Month In Passive Income

If you have $100,000 to invest, you can easily use it to unleash a dividend stream that pays you $940 a month. That’s $11,280 a year in dividends—on just $100K!

I know you’re probably thinking this sounds too good to be true (and you should be!), especially when 10-year Treasuries dribble out just 0.7%, and the typical S&P 500 stock isn’t much better, with a 1.7% yield.

You’re not retiring on either one of those meager payouts!

But $100,000 invested in a fund with an 11.3% dividend yield (like the one we’ll dive into below) gives you a good start toward clocking out, and on a modest nest egg, too.

The nice thing about this approach is that you’ll still invest in blue chip companies like Mastercard (MA), Deere & Co (DE) and PepsiCo (PEP). That’s the real magic of this strategy: it lets you take low payers like these (PepsiCo is the highest yielder of this trio, at 2.9%) and “squeeze” them for a far bigger payout. Here’s how it works:

Step 1: Open a Brokerage Account

This isn’t really a step for many people—if you’ve read this far, you probably already have a trading account. No matter what kind of account it is, you’re fine to use it (so long as it lets you trade US stocks, of course): there’s nothing exotic about the funds we’re going to target with this strategy. They trade on the major markets, just like stocks. Recommended For You

If you don’t have $100K in your account already, go ahead and transfer it in.

Step 2: Buy a Closed-End Fund

Next, you’ll need to purchase a closed-end fund (CEF). The name we’re targeting today is the Gabelli Equity Trust (GAB). Let’s get into a little more detail on both CEFs in general and GAB in particular.

First, a CEF is like a mutual fund or an exchange-traded fund (ETF), but with some key differences. Unlike mutual funds, whose values are reconciled and unit prices are set after each trading day, CEFs trade during the exchange’s opening hours, just like an ETF or a regular stock.

And unlike ETFs, a CEF has a fixed amount of shares that are established when the fund holds its IPO. While ETFs can, and do, increase their total number of shares outstanding, CEFs do not, which helps keep them small and more manageable. An ETF like the SPDR S&P 500 ETF (SPY) can balloon to have a whopping $278 billion in it, where the biggest CEF has just $4 billion in assets. GAB is much smaller, with $1.3 billion.

GAB is managed by a group of value investors who focus on high-quality, mostly mid-cap and large-cap stocks. This team is headlined by famed value-investing guru (and Warren Buffett disciple) Mario Gabelli. Mario and his team look for companies with reliable cash flow and rising profits, which is why the fund owns Mastercard and PepsiCo.

Unlike ETFs, which usually pay tiny dividends, GAB (like most CEFs) focuses on maximizing dividends to shareholders; it does this by collecting payouts from the companies it holds and rotating assets and occasionally taking profits, which it then gives to shareholders in the form of dividends. That’s one way the fund can sustain a double-digit dividend.

There’s another part to the fund’s strategy, too: a careful use of leverage—by borrowing to invest, Gabelli and his team can enhance their portfolio’s returns, boosting its profits (and your payouts) further. Leverage, of course, also amplifies losses, a risk Gabelli mitigates by targeting companies trading below their intrinsic value and by keeping his leverage manageable—right now, the team has borrowed against roughly 25% of the portfolio.

Leverage is a particularly smart strategy today, with the cost of borrowing essentially at zero.

Now let’s take an exploded view of our GAB investment, so we can see exactly what we’ve got on the line here, and how much we’re getting back in dividend cash:

Contrarian Outlook
Contrarian Outlook

Step 3: Wait Two Months

After we’ve bought our shares, the last part is the easiest: just wait for the checks to roll in.

GAB pays dividends every three months, with the next payout coming sometime around December 14. That means in about two months, an investor who puts $100K in now will have $2,830.05 in time for Christmas.

If you want to set this up as a recurring income stream, all you have to do is set an automatic-payment-transfer from your brokerage account to your bank account for $943.35 every month, and GAB’s dividends will appear in your account—in cash.

Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report “Indestructible Income: 5 Bargain Funds with Safe 8.8% Dividends.

Disclosure: noneMichael FosterI have worked as an equity analyst for a decade, focusing on fundamental analysis of businesses and portfolio allocation strategies. My reports are widely read by analysts and portfolio managers at some of the largest hedge funds and investment banks in the world, with trillions of dollars in assets under management. I’ve been traveling the world since 1999 and have no plans to stop. So far, I have lived in NYC, Hong Kong, London, Los Angeles, Seoul, Bangkok, Tokyo, and Kuala Lumpur. I received my Ph.D. in 2008 and continue to offer consulting services to institutional investors and ultra high net worth individuals.

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WealthPress 5.64K subscribers If you like this video don’t forget to give it a thumbs up 👍. Subscribe here for more stock market updates, tips, and news: https://www.youtube.com/c/WealthPress… and don’t forget to ring the bell to get notified. Follow us on our social media channels to watch in-depth interviews with Wealthpress Head Traders to see what other trading opportunities they are paying close attention to. 💻 Website: https://www.wealthpress.com 📷 Instagram: https://www.instagram.com/wealthpress… 🐦 Twitter: https://www.twitter.com/wealthpress 📘 Facebook: https://www.facebook.com/WealthPressF..

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Record Unemployment Has Contributed To A ‘Striking’ Shift Toward Bitcoin, New Research Reveals

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Bitcoin interest has surged in the wake of the coronavirus pandemic and the unprecedented measures undertaken by governments to contain it while propping up the global economy. The bitcoin price has bounced back to almost $10,000 per bitcoin after crashing to under $4,000 during the broad March coronavirus sell-off. Now, new research has revealed the extent public opinion has shifted toward bitcoin since 2017—with almost half of millennials “likely” to buy bitcoin within the next five years.

“With over 20 million Americans currently unemployed, the public narrative towards bitcoin has changed,” researchers at financial information platform The Tokenist wrote, summarizing their findings. “The results are striking. We found increased knowledge of, and growing confidence in, bitcoin among all age and gender groups surveyed. This effect was most pronounced in millennial respondents, 45% of whom would now preferentially invest in bitcoin over stocks, real estate and gold.”

As the coronavirus Covid-19 swept across the U.S., the unemployment rate soared to almost 15% in April, the highest level on record, with millenials among the hardest hit. In February, the unemployment rate was at a half-century low of 3.5%. The survey, which gauged how market fluctuations caused by Covid-19 has affected people’s view of bitcoin, revealed 47% of people trust bitcoin over big banks, an increase of 29 percentage points over the past three years.

Meanwhile, 43% of respondents, and 59% of millennials, thought that most people will be using bitcoin within the next decade and 44% of millennials report that they are likely to buy bitcoin in the next five years. “These data indicate that bitcoin has a bright future, and will likely benefit significantly from the current market crisis,” the researchers wrote. “With confidence in traditional investment instruments decreasing, bitcoin stands poised to offer investors an alternative, long-term store of value.”

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The research chimes with reports from the bitcoin and cryptocurrency community that coronavirus and its ramifications has boosted interest in bitcoin. “The surging activity we’ve seen since the beginning of 2020 has been in part inspired by the Federal Reserve’s unprecedented monetary intervention,” Alex Leishman, the founder of River Financial, a San Francisco-based startup bitcoin brokerage and financial services firm that has seen its client base double every month this year, said last week.

Growing interest in bitcoin from “seasoned macro investors” like Paul Tudor Jones, Dan Tapiero and Raoul Pal is legitimizing bitcoin “within the mainstream finance community,” according to Leishman. “The evolution of finance is only happening faster in the wake of the current global economic crisis, which has illuminated holes within traditional financial systems that can potentially be filled by bitcoin,” said Olaf Carlson-Wee, founder of hedge fund Polychain Capital, who recently led a River funding round.

The Tokenist surveyed around 5,000 people through April 2020, comparing the findings to surveys carried out by brokerage eToro, investor Blockchain Capital, and personal finance website BankRate in 2017.

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported

More than two million Americans requested unemployment compensation for the first time last week, which may or may not affect Bitcoin. Recording its seventh consecutive week of decline, last week hosted 2.44 million new unemployment claims, CNBC said in a May 21 brief . These numbers, however, fall within range of economist expectations. Within the timeframe surrounding coronavirus, Americans have posted 38.6 million jobless claims to date, CNBC said. Morgan Creek Digital co-founder and partner expressed a push of sentiment favoring a national reopening after weeks of business closures and shelter-in-place orders, which have increased job loss numbers.”We have to get the economy open and put people back to work safely,” Pompliano said in May 21 Tweet citing recent unemployment numbers. Do the recent job loss numbers affect Bitcoin
All data is taken from the source: https://cointelegraph.com/ Article Link: https://cointelegraph.com/news/recent…

5 Signs It’s Time to Change Your Financial Advisor

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How do you manage your finances? Do you have a financial advisor, or do you do it yourself? If you’ve taken the DIY (do-it-yourself) road, you’re very much in line with fellow Europeans

A CNBC and Acorns survey reveals that only 17 percent of Europeans use a financial advisor for their finances. One must note that these findings are from the March 2019 edition of the survey. The October edition of the same poll puts these figures close to 1 percent. While we understand that it’s a huge difference, the rather valuable insight is that very few Europeans use a professional financial expert to manage their finances and instead rely on their knowledge, expertise to handle their money.

However, is that a brilliant strategy? The answer would be both no and maybe. Let’s take up the first part of our answer.

A survey from GoBankingRates.com finds that a majority of Americans can’t even answer basic financial questions, a finding consistent with other similar studies. So it makes a little sense for people to manage their own finances.

However, there is a flip side as well. Financial experts believe that the availability of relevant information online, videos, articles, infographics, could be a reason why more Americans are confident in handling their money.

Are you in a similar dilemma: hire an expert or DIY? We’re going to find out what a financial advisor does, when is the right time to change your financial advisor, and how to choose one?

Why should you hire a financial advisor?

If you were to get a dental implant, you’d probably go to a dentist instead of your spouse do it for you, right? Sadly, when it comes to managing finances, many spouses (15 percent) leave financial management to their partners.

Research finds that have a financial advisor can have a profound impact on your financial health. More than 66 percent of Americans with a financial advisor feel financially secure against 30 percent without a financial advisor at their side. Having a financial advisor gives them a sense of moving in the right direction.

While some may be skeptical of advisor fees, research finds that the right financial advisor can very well compensate an investor for the asset management fees through impressive returns.

Copyright: Portia Antonia Alexis

Here are a few of things that a financial advisor can do for his clients:

Help you define your financial goals. What are your short-term goals? How do you see yourself financially after 25 years? How much money would you need during retirement?

These are some of the most common financial questions you may have. A financial advisor can help you define specific short-term and long-term goals and create a strategy to achieve them.

For instance, if you’re saving for the down payment of your first house, where should you keep that money? Or how much money do you need in the first place? Is your checking account the right place to keep it? Your financial advisor understands your housing requirements and can give a ballpark idea of how much money you may require. Similarly, he can suggest the right saving instruments, such as a high-yield savings account, to deposit your money.

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Similarly, your financial advisor can help you identify your retirement goals. Instead of having no estimate, he can put together a figure, backed by an investment strategy, to offer a sense of financial certainty.

Find investments that work for you. Not every investment suits your retirement portfolio. If you’re well in your 50s, investing in equity might be a risky choice. Similarly, if you’re in your late 20s or early 30s, putting all of your money in bonds or CDs may not be the smartest way to grow your wealth.

A financial advisor understands your goals and picks investments that will help you achieve them. Furthermore, he can advise investments that suit your risk profile, thereby limiting your overall risk exposure.

Let’s take the above example. For someone in his 50s, it is best to apply a conservative investing approach that focuses on consistent long-term returns instead of growth. At the same, a portion of your portfolio should be invested in growth-oriented financial instruments to fund your income for the next several years.

Help you gain more financial control over your life. Research finds that people having a financial advisor finds themselves in control of their life. Nine out of 10 Americans reveal that having financial order in their house makes them both confident and happy.

Financial problems can cause stress, and it’s not just major money issues, such as bankruptcy or an overwhelming amount of debt. Sometimes, it’s more about having financial control in your life, knowing how much money you’re bringing in, where you are spending it, and are you moving toward your financial goals.

A financial advisor helps you understand money better, creating strategies that work in your favor. You can be relieved of your stress with the right financial expert by your side.

Hold experience in addressing, resolving financial challenges. Financial advisors hold years of experience in managing finances, and as much as you would like to consider your circumstances unique, they’re often not. The chances are quite solid that your advisor has already helped someone facing the same challenges.

Let’s take the example of debt. If you have a huge debt, which only seems to grow despite your regular payments, your advisor can create a strategy to repay your debt, negotiate better payment terms, and guide you through the entire process. If you have a mix of debt, with both high interest and low-interest loans, paying down the most expensive debt while making minimum payments on others might help you save money on interest payments.

The key is to be transparent and as open as possible about the issues. By working together with your financial advisor, you may just regain your long-gone financial freedom.

As good as it may sound, not every financial advisor has your good interest in his mind. It’s critical to evaluate the performance of your investments regularly, ensuring that your advisor is keeping the promises he or she made initially.

Let’s have a look at some signs that indicate that you need a new financial advisor.

1. You’re not on track to meet your financial goals.

Most of the financial advisors will start a relationship by understanding your financial requirements, goals, and challenges.

They’ll list your short-term and long-term goals, and advise strategies to achieve them.

All good so far, but you suddenly notice that your investments aren’t helping you achieve your financial goals. In fact, if anything, you’re nowhere close to your financial goals or even on the right track.

It’s understandable if the investments occasionally miss their mark, but if that’s not the case, you need to change your advisor immediately.

As a responsible investor, you must track your financial goals and returns periodically.

2. Your advisor recommends investments that aren’t suitable for your portfolio.

Every time you speak with your financial advisor, he pitches a new investment product and instead insists on purchasing it. Sounds familiar? That’s a red flag, and if it’s happening with you, consider having a new advisor.

Every investment product or financial instrument has a risk profile, and the product must suit your risk tolerance level. It’s your financial advisor’s job to recommend products fitting that criteria.

Instead of blindly investing in a financial instrument, do some individual research, and if you have doubts, ask your financial advisor. One must understand that financial advisors often receive commissions for recommending a product, so you should always do personal research.

3. Your life is due for a significant change.

Are you on the verge of retirement? Is there a major life event that would affect your financial life? You need to make sure that your financial advisor is qualified for your new economic requirements.

Most investors tend to stay loyal to their long-term financial advisors, and for all the right reasons; however, if you’re retiring or there’s another financial change in your life, your financial advisor should be able to realign his financial strategy to suit your needs.

The best way is to ask your financial advisor for recommendations or suggestions and crosscheck it with a third-party expert. You can get professional advice on a per-session basis, so you don’t need a new advisor simply to validate the new strategy.

4. You’re not receiving monthly or quarterly reports.

Most of the financial advisors provide monthly, quarterly, and annual reports to their clients. That’s how you track how your money is doing. These reports should be detailed, helping you identify realized profits or losses, understand how your portfolio is doing, and provide a list of relevant accounts, such as portfolio number, demat account, 401k account or Roth IRA account number.

Additionally, you have complete rights to seek access to your online investment portfolio. Your financial advisor should have no problem whatsoever in sharing it.

However, if you don’t get at least quarterly and annual reports, it’s time to ask questions, and if your advisor isn’t answering, there’s your cue.

5. Your advisor changes your portfolio without informing upfront.

Did your financial advisor add a new product or investment without consulting you? It’s a common practice among financial advisors to rebalance your portfolio for maximum growth or minimizing any impact from market volatility, provided you gave them consent upfront. However, if you didn’t do it and your advisor anyways changed your portfolio, it’s time to find a new advisor.

If you’ve identified one or several of these red flags, its likely time to change financial advisors. Here are a few suggestions for hiring the right advisor this time around.

Find out if your financial advisor is a fiduciary. Fiduciaries are investment advisors who are registered either with a state regulator or the SEC. It’s their duty to act in your best interest, and in case of any possible conflicts of interest, they must notify you in advance.

You must understand that not every investment advisor is a fiduciary, and stockbrokers, broker-dealers, and insurance agents aren’t bound with the same duty to work in your best interest.

You can ask your financial advisor for his registration number and crosscheck it on the NAPFA (National Association of Personal Financial Advisors) website.

In addition to the fiduciary standard, find out if your financial advisor has any specific certifications, such as CFP (Certified Financial Professionals), ChFC (Chartered Financial Consultant), or AIF (Accredited Investment Fiduciary). It’ll help you understand their qualifications and whether they’re suitable for your financial requirements.

Ask how your financial advisor gets paid. How a financial advisor gets paid can have a massive impact on your portfolio composition. Financial advisors operate through with different fee structures, where some are fee-only advisors, whereas others may receive a commission to recommend a particular product. There are other fee models, such as asset management fees or success fees (hedge funds).

While there are no rules defining the ideal compensation models, it’s critical that your financial advisor discloses it.

Verify credentials and customer feedback. Checking the credentials of your financial advisor is only the first step. It’s critical to find out if there’re any possible complaints registered against your advisor. You can do that by merely going to the SEC website, CFP® Board, or checking your advisor’s records with the FINRA (Financial Industry Regulatory Authority). If you find a complaint, ask your advisor about it, although multiple complaints are a red flag.

In addition to checking official records, ask your financial advisor for references. Any good advisor would be happy to share them. Speak with the previous or existing clients of the advisor and get thorough feedback. You can search more about your financial advisor online.

The right financial advisor can make your life better, peaceful, and financially rewarding. It’s crucial to do thorough research before hiring a financial expert. Even when you have someone looking after your finances, make it a habit to track your portfolio. A little bit of caution and routine checkup will go a long way in securing your financial future.

Portia Antonia Alexis

By:

Source: https://www.entrepreneur.com

This video discusses some common types of financial advisors, the key differences between them, and why you may choose to work with one. We post educational videos that bring investing and finance topics back down to earth weekly. Have a question or topic suggestion? Let us know.
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