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Home » Business And Finance Articles » Prospering With Mutual Funds How Anyone Can Afford An Investment Advisor

Prospering with Mutual Funds: How anyone can "Afford" an Investment Advisor

Recently I was invited to appear on a live CNNfn television show to discuss my article "How to evaluate Load vs. No Load Mutual Funds." (You can read that article on my website http://www.successful-investment.com/articles21.htm)

As the producer and I were working out the logistics of my appearance, she mentioned in passing that "most people can't afford an investment advisor."

While that wasn't the time or place for me to discuss this, I realized that many people might have a similar misconception. Had conditions allowed, I would have pointed out the following to her.

There are only two ways an individual can invest in mutual funds: Selecting and investing themselves or using outside help. If they use outside help they'll have a couple of choices again: A commissioned salesperson (broker, financial planner or Registered Representative) or a fee-based investment advisor.

Most people don't know the difference and often start with a broker who charges about 6% commission off the top to purchase a mutual fund. The fund is usually from a limited selection of fund families the broker has a relationship with. He, of course, would never recommend a no load fund or an exchange traded fund (ETF), since it is not in his best interest -- although it might be in yours.

Having a fee-based investment professional handling your portfolio will get you as close as possible to receiving advice that is based on nothing but the advisor's best knowledge and evaluation of the market. They advise only what they consider top performing funds since sales commission is not a consideration and does not create any conflict of interest for them. But, how can you "afford" an advisor?

First off, the advisor's fee is usually in the range of 1% to 3% per year depending on portfolio size. This amount is billed in advance on a pro-rated quarterly basis and charged directly to your investment account. This creates an initial savings right off the bat.

Most fee-based advisors offer complete service as far as your portfolio is concerned. That means that they don't simply "sell" you a mutual fund and disappear until you call again. Since investors evaluate advisors based on the performance of their portfolio, advisors are keenly interested in maximizing your bottom line. In the long run, your gain should outweigh their fee.

Many advisors utilize an investment discipline or methodology that keeps you not only invested during upswings in the market, but also in the appropriate funds for the current economic environment. For example, at one time, tech funds were hot. Now, generally, they're not. An advisor watching market trends could have been able to assist you in avoiding the bursting bubble. (In fact, my clients were advised to pull out of the market and into the safety of money markets in October, 2000, just before the market plummeted. What they didn't lose because of this will more than cover my fees for the rest of their lives!)

Most advisors don't have lengthy agreements and you usually can cancel by giving 2 weeks notice. The advisor never has access to your money because he is affiliated with a custodian who handles the money, the monthly statements and fulfills the proper legal reporting requirements.

With this arrangement an advisor can actually save you money. How?

1. The advisor will use only no load funds. Because of his affiliation with a custodian (often a major brokerage firm), he'll have access to some 10,000 mutual funds, not just to one or two fund families as most commissioned brokers do. This allows him to pick the best available, which potentially means a higher return for his clients.

2. At times there are superior load funds available, especially in the international arena. I have used a couple of those in my own practice because they were available to me as "load waived funds" and my clients got the advantage without paying a sales commission.

3. Custodians many times also offer "Advisor only" funds. These are usually high performing mutual funds where the fund family wishes, for whatever reason, to deal only with investment professionals, so they set high minimum dollar requirements.

Such was the case in my practice during our most recent buy signal (4/29/03). I purchased the NAMCX fund, which was only available to advisors through my custodian. This fund rewarded us with a cool 47% over the following five months. Most independent investors would not have had access to such a fund on their own.

Keep in mind that markets fluctuate and starting with an advisor in the middle of a downturn will not likely yield high profits at first. However, over time, an advisor will most likely produce results better than what you would reasonably expect yourself to do, even with the advisor's modest fee.

Choosing the right advisor and watching how your portfolio performs with their advice will almost always prove that it doesn't cost you to have an investment advisor, it pays.

And here is another random article you might be interested in...

Brand Naming --- Art, Skill, and Luck!

A great name is like extra octane in a brand. A bad, boring or sound-alike name won't necessarily kill a brands chances for success. In most cases however, it dramatically dilutes the brand equity and potency.

Do You Have A Name That Basically Sucks?

If so, shame on you. If you acquired it, I send my sympathy.

Should you change it? Yes. It will cost some bucks, but it's also a great opportunity to get a lot of great attention and renewed momentum. Weigh it out, look at the cost versus the benefit and remember that change can be scary, but a lame brand can be scarier!

Birthing A Brand Name

The task of developing that killer name has become quite complex. For years, business owners and management named their offspring, then creative service firms and ad agencies jumped in, often with a sprinkling of college talent, finally, the general public added their wisdom in naming contests. I'm sure all have produced their share of brilliant names as well as some very scary ones. Now this field of art, science, skill, and luck has gone professional. Naming brands is big business and can come with a big price tag. Hire a professional naming company and expect a bill of $10,000-$100,000 or more before the graphic execution or production.

So What Is A Great Name Worth?

The answer: a lot. If your brand is properly nourished, it grows and has a long shelf life or history-do the math.

Not All Great Brand Names Cost A Lot

Nike(tm) is one of the best examples. Nike is Greek for victory and is also the Greek goddess of victory. The name came in a dream to Jeff Johnson, Nike's first "real" employee, and replaced the original name of Blue Ribbon Sports. It beat out Phil Knight's own name change idea of "Dimension 6." However, the company did pay Carolyn Davidson, a graphic design student at Portland State University, $35 in 1971 to design the trademark "swoosh."

When faced with the challenge of naming, start with your ideas and those of your staff. No matter what, even if the names you come up with stink, it's a good creative exercise about defining your brand essence. If you have the budget, outside input and other naming solutions can also be a valid investment. Remember that the life and benefit of your brand name may last for years.

It will be plastered on lots of things including your market's mind. Whatever you spend, divide it by the projected years of use and value. This same formula applies for investments in corporate identities and tagline. They are as valuable as a great employee or, piece of manufacturing equipment.

Whether you decide to outsource or to create on your own name, I suggest walking through the following preliminary exercise.

Ask Yourself The Following:

Who will ultimately decide the name? One person or a team? Whoever that is should be involved in the criteria-building process. What kind of brand are you naming? Company, consumer product, business service, or event? What is the expected life of the brand name? Does the name fit into a larger family of names? Will it be used only in the U.S. or will it go global? Remember that today "global" can mean the Internet too. Who is your primary audience for the brand names? Are you creating a new category or joining an existing one? If joining a category, what are your competitors' names? What are the primary strategies for building your brand?

Once you've completed your basic criteria or framework, you can proceed with the grueling task of a name dump of endless possibilities.

Should A Name Be Literal And Descriptive Or Obscure And Emotional?

My tendency tilts toward obscure and certainly emotional, primarily because I'm a strong proponent of distinctive brands. However, I also believe each case is unique and sometimes brand names get passed down and changing them would take an act of Congress.

An Obscure Or Unfamiliar Word Can Be A Brand Home Run

Consider Apple(tm), Nike(tm), Google(tm), FUBU(tm), and Yahoo(tm). They all have visibility/frequency, brand-story telling communication, and brand performance. They are all hugely successful brands but, started as small companies.

Although not my favorite, literal and descriptive words can work in some brand naming situations. Generally, though proceed with caution because they can be more easily copied or imitated, leading to buyer confusion. Such confusion usually defeats the purpose of a sound brand.

If you have a big branding budget, you can salvage or sustain a boring, generic, or literal brand name with some other compelling messaging. Take, for example, Southwest Airlines. Their consistently creative and "on brand" advertising has transformed a somewhat nonexciting name into a great brand name. However, most companies don't have the luxury of Southwest's media budget or have not engaged a great ad agency like GSDM in Austin, Texas.

With that said, unless you have a big, endless budget, I say... Avoid like the plague:

Dumb Generic Names

Dumb generic names like Computer Solutions, Performance Printing or Innovative Technologies. I'm sorry if I've offended anyone, but these names will just make you spend more and work harder at building a brand. They don't have legs and will likely drown in the sea of sameness. Avoiding generics names is also critical in consumer-packaged products, especially when private label copycats by mass retailers are showing up. Many times the name can be the strong point of difference.

Copycat Names

I also think copycat names or those that sound like a competitor or some other big brand are not worthy of much.

Names That Are Hard To Spell Or Pronounce

Finally a name should be something most people can spell and certainly pronounce.

Whatever route you take, be it working with a naming company, a creative consultant, rallying your troops and making it an internal company project, enlisting strangers in a naming contest, or combining several of these methods, you have created an extensive list of possible contenders. Now what?

More Big Naming Questions

How will the market receive the name? With supporting context, will the market get it?

Will it jive with your strategic positioning of the brand? Are there negative connotations or associations with the name? Is it available to use? On the earth? On the Web?

Once you've boiled down the list of prospects, you can organize nonscientific opinion polls (i.e., in shopping malls, bars, office gatherings). You can also conduct focus groups to test reactions further or you can do a pricey quantifiable study to gauge understanding acceptance, likability, or associations with your name prospect.

Is there a magic, fool-proof method for testing names? No. In fact, sometimes too much analysis just delays decisions and defeats the whole mission of naming your brand before the next decade. I recommend that you test a little, listen a little to people you respect, listen to your gut feelings, and proceed with a choice.

Great Brand Names

1) Are emotional
2) Stick in the brain
3) Have personalities
4) Have depth

While The Brand Name Is Very Important, A Brand Cannot Survive On Name Alone

The brand name and how the brand is executed are equally vital for a successful and sustained brand life. A great brand name can serve as the anchor to your cause, a symbol to your story, a point of difference in your marketplace, a memory trigger, or just one important part of your branding arsenal. Go get you a great one!