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Do's, Don'ts, and other words of caution when you purchase financial services and products.
by Bill Baker, J.D.
1). Do your homework. Don't purchase anything until you study the product or service and compare it to other similarly situated products or services.
2). Don't buy hype. Make your purchase based on facts that can be supported. When claims are made about the quality, yield, or other aspect of a product or service, get these claims in writing. Check out the claims being made with an independent third party and don't forget to compare the product or service to other similarly situated products or services.
3). Don't buy the plush offices, advertising budget, and huge executive salaries. Buy the product or service! The biggest companies don't always have the best products and services. What many of them do have are astronomical overheads that must be paid for by passing on these costs to the consumer. That's you!
4). Do what is right for you. Don't let other people do your thinking for you. A product or service that may be perfect for your neighbor, friend, or other acquaintance may be a disaster for you. Unfortunately, peer pressure is a powerful sales tool in a culture like the United States where control and conformity are rewarded and individualism is usually punished, taxed, or regulated out of existence.
5). Haggle over price. Whether you are buying an investment product from a commissioned salesperson or purchasing legal, accounting, or financial planning services, make an offer. For example, if an attorney says he or she is going to charge you $100 per hour, offer to pay $80 per hour. If you end up getting the services for $90 per hour, you've saved 10%. If the attorney won't negotiate price go somewhere else. There are lots of attorneys, accountants, and financial planners in this world who will negotiate the price of their services.
6). Don't be rushed or pressured into making a decision. Investment products and services are like buses in a city. If you miss one, there will be another one, that is just as good or better, coming down the road.
7). Get it in writing. Promises of pricing, yield, cost of services, product performance, etc. should all be reduced to writing. If the person whom you are purchasing a product or service from is not willing to put what they have stated or promised in writing, prior to the time you purchase the product or service, don't do business with them.
8). Do your bookkeeping; keep your records organized. Whenever you get a receipt for a transaction, a monthly statement, or an invoice, file it so you can find it later. Maintain an accounting of your financial transactions so you know what is going on and follow your monthly investment statements.
9). Don't exceed your risk tolerance. It has been said that worry is the interest paid by those who borrow trouble.If you are a conservative investor who worries about the safety of T-bills, don't put yourself through excruciating psychological pain and sleepless nights by investing in pork-belly futures or other speculative investments.
10). Meet your living expenses, then do your investing. Don't risk money you can't afford to lose and don't tie up money you will need before it becomes available.
Copyright © 1996
WM. BAKER ASSOCIATES
All Rights Reserved
