[fname], last week from my report I covered Mistake #10: Thinking someone at your company is "watching over your account".

Today I'll cover Mistake #
11: Investing in high commission - based investments 

There is a huge difference between an investment advisor and a "broker." Investment advisors are fiduciaries who are legally responsible to act in your best interest. "Brokers" might make more in commissions in 5 minutes on your account than a trusted advisor might make in 6-7 YEARS. Therefore, the sales pitch is going to sound nice and juicy.

Unfortunately, many large banks, investment firms, and "brokers" want only one thing.

Their goal is to generate the highest revenue with the least amount of effort and money possible. This might not even be the broker's fault. Many friends have worked as a "registered rep" for a major Wall Street Investment firm.

Many of the "brokers" for the firm sold the highest commission-based products because the bank or investment firm had structured their pay plan in such a way that they sometimes kept 80% of the revenue.

Here are some of the highest commission products "brokers" might try to pitch you:

1. Equity Indexed Annuities Commissions up to 10-12% of the amount invested
(You invest $250,000 and that firm gets a $25,000 payday!)

2. Loaded Mutual funds Usually 5% up front or backend fees. Loaded funds are not all bad, but the advice you get AFTER THE PURCHASE is going to vary a lot. What incentive does a "broker" have to work with you if they already have made their money?
If you do purchase loaded funds, make sure your broker is using breakpoints to lower your overall fees.

3. High Expense Mutual funds There are funds out there that have annual expenses over 2%. Add in trading costs and you might be doomed before you even begin (2.5% on $250,000 is $6,250 PER YEAR.)

4. Expensive Fee-based Advice Add up ALL of the fees. You might have to pay your broker, your broker's firm, investment managers, and trading costs. The higher the total number, the harder it will be for your portfolio to survive.

5. Variable Annuities Loaded with Guarantees Insurance companies have gotten very creative. You can now buy all type of guarantees with annuities. However, the devil is always in the details. Read the fine print! These annuities pay 6-9% upfront commissions, so keep that in mind. Be skeptical.

Here is what a former SEC Chairman has to say on the issue:

"You should fire your broker and find an investment advisor. Brokerage firms would like you to think that they perform the same functions as investment advisors. Many brokers call themselves 'financial consultants' or 'financial advisors'. But they are not the same as independent investment advisors... an investment advisor's fiduciary duty is on a higher plane, like that of a lawyer, a trustee, or the executor of an estate." - Arthur Levitt, Former SEC Chairman.

Just remember too that as the market changes, your portfolio grows and time passes, often your investment goals and your tolerance for risk changes. When this happens you need to adjust your asset allocations accordingly.

That is why I offer a FREE Investment Analysis & Portfolio Review.  It is a no-obligation assessment of your portfolio to see if you're still invested correctly for your goals, your risk tolerance and your portfolio size.

To get started on your analysis & review either reply to this email or call me here at the office at [aphone].

I hope you are enjoying the report!  If you did not get a chance to read it yet here again is the link to download the PDF where you can open it: http://www.worst13mistakes.com/13mistakes-thanks.html
 
Regards, Ed

W. Edward Newton Jr., CFP
Newton Financial Network
13850 Ballantyne Corporate Place, Suite 500
Charlotte, NC 28277
Phone: (704) 552-8689
ednewton@newtoninvestments.com
http://www.newtonfinancialnetwork.com