Take Charge of Your Money

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If you’re a senior investor, you don’t want to leave the fate of your retirement nest egg to chance. You’ve spent your life building up that savings. Here’s how you can secure it for the rest of your retirement.

Map out your financial goals

Determine your budget needs and your risk tolerance levels before choosing investments. Sound investing requires careful consideration.

Ask yourself:

• How much income will you need to meet fixed expenses, apart from any pension or Social Security income?
• Do you have children or grandchildren to educate?
• Are your elderly parents in need of care?
• How is your own health?

If you need time to explore your options, put the funds in a money market account. You can then invest when you’re ready. Don’t fall for high pressure sales tactics from potential advisers -- a quick fix is rarely the answer.

Evaluate your adviser

When seeking potential investment advisers, talk to multiple options and review their credentials. Shady advisers may try to position themselves with more credibility than they actually have.

Watch for these warning signs when evaluating advisers:

• Unclear connections to financial organizations. Some unaffiliated brokers may sell investments on a bank’s premises, without bank or FDIC protection.
• Poor records. Avoid advisers with records of state, federal, and self-regulatory disciplinary actions, negative arbitration decisions, or civil litigation judgments.
• Confusing or generic job titles. Shady brokers may position themselves as “financial consultants” or “investment counselors,” without extra training or expertise outside of selling stocks and bonds.

If you are working with any investment advisers, ask to see both parts of their Form ADV.

• They must give you Part II, or a similar document showing their method of compensation, education, areas of expertise, investment strategies, and business methods.
• Part I can also help, showing disciplinary history.

Contact the Securities Division online to confirm any information from your evaluation.

Know your investment

Before purchasing an investment, understand its cost, risk factors, goals, performance history, and any special fees. And get everything in writing.

Most legitimate investment products come with a detailed prospectus (or similar document). Some products also include a condensed summary prospectus highlighting key information. You don’t need to read every word of it, but you should still review it to understand the nature and risk of the investment.

For example: If you’re considering a mutual fund investment, you’d want answers to the following questions:

• What are the fund’s goals and investment strategies?
• What are the fees and other costs? How do they compare to similar funds?
• How are the costs determined?
• What is the fund’s performance and management history? How does it compare with similar funds?
• What are the risks? How does they stack up with comparable funds?
• Are derivatives part of the fund? If so, are they used for hedging or speculating?
• Who makes investment decisions for the fund?
• Who can you call for more information?

You can also use online and local resources to review investments. For example, the research firm Morningstar publishes detailed analyses of investment products.

Know your adviser’s commission

Truly objective investment advice is rarely free. You’ll likely either work with fee-only planners or commission-based advisers.

Commissions vary by product type and risk level. In most cases, the higher the risk, the higher the commission -- and the higher likelihood of shady advisers scamming investors.

• Sales pitches aren’t impartial advice. Avoid brokers who seem too eager to put you into an in-house mutual fund, or in unfamiliar exotic investments.
• Ask brokers if they will receive any extra commission or other incentives (such as a prize, a trip, or credit for a sales contest) for selling you a certain product.

Location doesn’t always convey legitimacy

Banks may provide more convenience than brokerage firms as investment sites, but they can’t protect you if you invest in uninsured products. Brokerage firms affiliated with banks sometimes offer only a limited range of investment options, and may favor their own products.

Review your account statements

The account statement is your primary tool as an investor for policing your investments.

Your statement should only cover authorized investments. Check each statement for investment performance, costs, and documented commissions or fees.

• If you can’t find this information on your statement, ask your adviser to calculate the figures and provide the results in writing. They must do this at your request – don’t work with anyone who can’t (or won’t) provide this information.
• Ask about any unfamiliar terms and abbreviations on your statement. Your adviser should help translate any unclear terms.

Ask questions

You control your money, even if you hire an expert to help manage it. You have the right to question your adviser’s recommendations, request alternatives, assess risks, and determine commissions or fees.

Don’t give too much account power to your adviser. Their idea of a “good trade” might not be in your best interest. And if someone tries to assure you that an uninsured investment is as safe as “the money in your pocket,” walk out. It’s better to keep the money in your pocket.

For more information, visit the Securities Division online or call 800-269-5428.