Andrew Nelson

Is Your “Uncle Larry” Giving You The Best Investment Advice?

I’ve done it with a construction project at my house and maybe you’ve done it with your retirement account. Yes, I’m talking about going to Uncle Larry, the person who is never short on advice but not necessarily an expert. For those of you who aren’t tracking, “Uncle Larry” is a figurative yet all too real figure who is willing to give out advice about most anything, and we tend to eat it up.

Even though Uncle Larry is a tongue-in-cheek character, the reality is I’ve seen the damage he or she has done to retirement accounts. I get it, finding sound unbiased advice isn’t easy and the deck can be stacked against investors when it comes to receiving it. The good news is there’s hope. While we can’t always run away from unsolicited advice, we can be equipped with some perspective and good questions to ask. My hope is to provide an outline with some good questions and standards when it comes to receiving advice, regardless of whether it’s from a family member or professional.

What’s your track record?

  • This question might be a little awkward if you’re asking your sister-in-law at the Thanksgiving table, but it is a reasonable one if she is offering advice on your retirement plan.
  • Don’t be afraid to get specific! If it’s an advisor, ask for references. If it’s a family member, ask for last year’s statement!

What’s your process for a recommendation?

  • If all your older brother is doing is simply looking at what fund has performed best for the last 3 months, odds are you aren’t going to be in a good situation. Instead, looking at the funds expense ratio, or cost structure of the fund can be a great resource. The lower the expense ratio (relative to the asset class) the better the predictor of returns.

Is there a conflict of interest?

  • This question is more specific to the cousin who works as a stock broker. If the name of the company she works for is the same as the name on the mutual funds in your account, that’s probably not a good sign. Imagine if Pizza Hut was the judge of the country’s best pizza; that’s like asking for the best fund from someone who is compensated by the recommendation they are making!

So what do I do?

  • Ideally you have a personal financial advisor or an advisor through your retirement plan who aligns with your best interest, Registered Investment Advisor (RIA). It’s worth asking if your advisor is a “fee only” fiduciary who by law is required to act in your best interest.

 

Human Investing is one of many companies who act as a fiduciary to clients and plan participants. Note: that our official stance on receiving advice from a non-professional family member is not a best practice. However, if your Uncle Larry has given you advice and you would like a second opinion, we would love to help you. Please don’t hesitate to email or call!

Call: 503.905.3100

Email: andrew@humaninvesting.com