All the retirement planning and saving in the world won't help if you don't pay attention. That includes watching carefully and making sure that the people you hire to manage your money are doing the best job possible.
Earlier this week, it was announced that a retired woman from Pittsfield, Mass., was awarded $136,000 in an arbitration with investment firm Smith Barney, now known as Morgan Stanley Smith Barney. In 2006, the brokerage had invested all of the retiree's savings in General Motor's preferred stock. As you undoubtedly know, GM faced bankruptcy in 2009 and the U.S. government bailed it out. Among the biggest losers in the process were preferred stockholders. This retiree lost 76 percent of her investment.
The retiree and her attorney appealed to the Financial Industry Regulatory Authority, or FINRA, and an arbitration panel ruled in her favor. FINRA determined that the recommendation to purchase GM stock was not suitable for the retiree's portfolio. The arbitration panel also ordered Smith Barney to pay the retiree's attorney's fees.
This retiree was lucky. Other people whose retirement funds are invested poorly don't have anyone to bail them out. They just lose their money.
Lynne Ford, who is the CEO of ING Financial Solution's individual retirement division, is a proponent of hiring a financial adviser to help you evaluate your investment decisions -- even if you decide to manage your own money. "Having someone to run your ideas by is very important," Ford says.
But even Ford, who is in the business, thinks picking the right person for that job can be a challenge. "Treat it like medical advice," she says. "If you have a serious issue, get two or three opinions."
Once you have lined up the adviser possibilities, she suggests asking the candidates to produce recommendations, comparing the investment approaches of each and definitely, "Trusting your gut."
Once you've hired someone, she urges you to constantly review what your financial adviser does. And she says you should expect to hear from the adviser frequently. "If you don't hear from your financial adviser regularly, you should fire him," she says flatly.