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Buyer Beware. What to Ask Before Buying a Financial Product

Posted by Shanna Tingom, AAMS® on Dec 22, 2015 2:02:12 PM

When it comes to investing, I encourage people to be cautious. There are different types of investments that meet different goals so it’s important to ask questions and research the best options for your family and work with a financial professional you can trust.

Here are questions to ask before buying a financial product:

Why are you buying this investment? Just because your family member or friend invests in something, doesn’t make it right for you. Before sinking your money into an investment that you will regret later, think about what it does for you today as well as in the future.

Is the investment from a captive company? A captive company essentially performs all functions of the business, including running the investments. There is little or no oversight which can cause problems for investors particularly when they want to sell their investment. You may not be able to because of the terms of the investment.

What are the payout terms? This is important to ask to avoid terms that are not investor friendly. For example, you may have to tie up a significant amount of money for a significant period of time before you can cash it out. This poses problems especially for retirees who need their money for immediate expenses.

What do they do with profits? Follow the cash to understand more about a business or mutual fund before investing. They will save the money, reinvest into their organization, or pay out dividends. If they aren’t doing that or can’t prove it, you may be getting into an investment that won’t serve you. Think Bernie Madoff or Enron.

What is the commission paid to the agent and how is it paid? Not everyone has your best interests at heart so don’t be afraid to ask questions. They may be selling you the product that yields the highest commission and not the one that is best for your long term financial plan. It’s important to find the right financial professional who has your interests in mind when they present investment options to you.

Not every investment is right for your unique situation. It’s worth your time and money to ask questions and research to understand the best option for your family.

If you’re wondering the best investments for your financial plan, schedule an appointment with Heritage Financial Strategies at 480-397-1184 today!