Most people interested in self directed IRA strategies are simply tired of experiencing the mediocrity and volatility of the stock market while hearing the success stories of real estate investors. Because of this, when researching self directed information many people get the impression that real estate = good while stock market = bad. So, financial advisors and CFPs are the bad guys? NO!
A good CFP can be very beneficial to your investment plans. The trick is finding a good CFP. A CFP is to the stock market what a realtor is to real estate. A CFP usually gets paid regardless of how well your stock market related investments perform. A CFP is usually more focused on earning their commission than earning your return.
How do you find a good one?
A good CFP is one whose top priority is your return on investment… because they know your long-term loyalty is to them if they truly look out for YOU first. How do you find out whether they are more focused on YOUR return or THEIR commission? Ask them a simple question: I’m considering converting my IRA to a passive custodian who will let me invest in almost anything I want. This way I can dabble in real estate and private equities, while still allocating a portion of my assets to an investment account with you. What do you think? Now sit back and see what they say.
A good CFP says: How much are you thinking of allocating into real estate and private equities? Who are you going to have helping you with those investments? At this point, a good CFP should primarily show their concern of you involving a real estate expert and/or private equities expert in your plans since they are probably not an expert in those fields themselves. A good CFP is fully aware of and admits that private equities outperform
publicly traded securities and that the worlds wealthiest people hold only 34% of their wealth in publicly traded equities. They are willing to handle only a third of your assets if it creates long term loyalty to them.
A selfish CFP says: That’s risky. You should keep all your money with me. Consider REITS instead. Over the long term, the stock market has risen by 9% per year, while real estate has appreciated less than 9% per year. This is a very good point for a person who plans to buy the whole stock market or the whole real estate market. This response from your CFP really indicates that they know how to invest your money into the stock market, but they don’t know how to invest your money into real estate. A selfish CFP wants to handle ALL of your assets which creates the highest possible commission for them now.
Depending on what your investment objectives are, a CFP or financial advisor can be very valuable. If you are going to involve a CFP in your investments, make the extra effort to find a good one.