Everyone should know about these financial secrets!
We all want to have more money and live a comfortable and fulfilling life. And you’ve probably heard many times financial experts telling their clients how they should make their money work for them. They also keep preaching that people should stop earning money and start earning wealth.
Of course, these tips are incredible, and they can indeed help us have more financial freedom. But it’s not enough! There are many financial secrets your advisor won’t tell you, and that’s a shame. However, I spent a few weeks analyzing what these silk tie and pressed suit people tell their clients, and I want to share everything with you.
I’ve been to advisors a few times myself, and I know a couple of things. But enough with the introduction; I know you’re eager to dive into the financial secrets the pros don’t want to share. So, let’s get started!
1. Every expert is different
If you want to avoid people keeping financial secrets from you, it’s time to learn all the abbreviations. Certified Public Accountants (CPAs) are responsible for going through state certifications to handle accounting, auditing, taxes, and consulting. Tax attorneys, Certified Financial Planners (CFPs), and Enrolled Agents (EAs) all possess their licenses and certificates, although they specialize in different fields.
2. You don’t always need a pro
Here’s a useful financial secret: you shouldn’t always hire a professional. Before you start doing your research on different advice services, take a few moments to understand when to use a pro and when to do things on your own, especially during tax season. Even if your postcard tax filing isn’t here yet, your situation is probably much simpler than you imagine.
It might not be a terrible idea to ask around to make sure you’ve taken advantage of all the tax breaks available. But you’re probably better off doing it alone if you only have one W-2 (or maybe two) and no other sources of income.
3. You can save money if you go to an EA
Did you know that EAs aren’t required to pass several rigorous tests? Unlike CPAs, they’re not specifically trained as accountants. As a result, they might not be able to provide you with full financial advice, but when it comes to the area they specialize in, you can’t go wrong with them.
On the other hand, EAs must pass IRS competency tests to receive legal authorizations and be able to do people’s taxes as paid consultants. With that being said, if you only need tax help, you don’t need a CPA, because an EA might be exactly what you need.
And here’s another financial secret: you can save a ton of money with an EA and they will help you a lot too.
4. Run a background check
If you need financial consultants, it means you need a pro to help you with your issue, so why not ensure you get the best pro for the job? Do a short background check. You can visit the nonprofit agency Better Business Bureau to see whether the advisor or their financial firm is involved in any problems or lawsuits.
Take a look at the advisor’s license by completing some homework with the Certified Financial Planner Board of Standards, Inc. Understandably, you want to learn everything you can about this individual before asking for their assistance. You wouldn’t trust your financial security to just anybody, would you?
…Are you curious about what other financial secrets the experts might be keeping to themselves? Dive in and find out!
5. Stay away from guarantees and promises
Here’s something I’ve learned the hard way: if your advisor promises you specific growth, watch out. It’s usually a red flag. Several factors can influence market growth, so you can never be sure about this. A simple financial secret is this: if it sounds too good to be true, it probably is. If you want to make safe investments, don’t forget that guarantees and promises are nothing but smoke.
6. Pay attention to insurance deductibles
When it comes to health insurance, deductibles are rather simple. You easily pay out of your pocket a specific amount, and then your insurance will cover the rest. Unfortunately, not every kind of insurance operates in the same way.
According to different licensed insurance professionals, plenty of consumers use their deductibles for minor repairs without understanding that they constitute a claim.
Here’s a financial secret: claims can raise monthly rates and remain on file for five years. If you make too many claims, for instance, certain insurance companies might even decide to cancel your policy. To avoid something like this, you should set aside some money for car repairs and maintenance.
7. Your savings could be losing value
This isn’t much of a financial secret, but it seems that more and more people forget about it. Speaking of that, inflation is probably not something new to you, but how much did you think of how it influences your savings? If you want to master your finances, make sure to keep tabs on inflation using the Consumer Price Index (CPI). It’s a great tool for staying informed!
If you keep your money under the mattress, it might be losing value, and you end up losing time and effort. You can put them into a savings account or you can invest them in something you need now or in the future.
8. Their “certifications” might not be real
A financial secret not many people are aware of is that financial professionals typically go by several names, such as life coaches, insurance specialists, wealth managers, financial planners, and so many others. So, what can you do in this situation? How important is their certificate?
Long story short, everything comes from the type of advice they give you. It doesn’t hurt to be a bit skeptical; after all, it’s your money we’re talking about. Just because someone wearing a suit and tie tells you they have the best financial advice for you doesn’t mean it’s true. They might be better salespeople than advisors, so be careful who you pay to help you with your money.
…Up next is a financial secret that’s incredibly useful, so make sure you pay close attention!
9. What about discounts?
Did you know that the best fee discounts come from your family and friends’ referrals? Yes, that’s true. Many advisors offer discounts to their clients but won’t advertise them. If you want to save money, all you have to do is ask for a discount.
However, they need to earn enough for a living too, so don’t expect to cut their fees in half for anyone. Asking your family and friends to refer you is one of the best and easiest ways to find a serious expert. As you probably know, negotiations are always better and more effective with established relationships.
10. They don’t know the market better than you
Insider trading is illegal. Despite having significantly more market monitoring experience than you, neither a financial pro nor you can predict the direction of the market. You should NEVER invest without first speaking with a qualified expert, but you also don’t have to accept their advice as gospel. Even though you collaborate with someone to achieve your financial goals, don’t forget to do your own research too. It helps!
11. Pay attention to “friendly advice”
Financial secret no. 11: watch out for friendly advice. You can never know someone’s intention! “I’m telling you, this item is going to be huge in the next few years.” Yes, we all secretly hope that someone will introduce us to the next Apple or Google before their stock prices explode, but how can you be certain that something like this will happen in the first place?
If you have a friend, coworker, family member, or anyone close to you making promises about a specific product or something they believe will be all the rage in five years, don’t buy it! Experts often share stories of people coming to them with stock recommendations based on what they believe to be insider information, usually from someone without a background in finance. The simplest approach to profiting the next time this occurs is to avoid investing in it. Of course, there’s no pain to gain, but what if there’s no gain after all?
…If this is your situation, ask a pro before making any important decisions! And don’t forget to follow your gut too!
12. You can’t beat the market
Here’s a financial secret everyone should know: if someone tells you that they can beat the market, they can’t. As we’ve already said throughout this article, no one can predict the future 100%. Of course, there is a “beat the market” strategy, but it imposes very high risks with low success chances.
You might think about Warren Buffett and how he managed to beat the market, but this is a very different thing: he doesn’t invest in businesses; he simply buys them. Huge differences and huge outcomes.
…We’ve got a lot more financial secrets to share, so let’s keep going! Stay tuned for more important tips.
13. Pay attention to products that mix investments with insurance
Products that mix insurance with investments are sometimes called “hybrid” insurance contracts. If the policyholder needs long-term medical care, hybrid policies are designed to cover it. The main advantage is that if you change your mind, you, the holder, can get back the majority of the money you paid for the premium. But not entirely.
According to professionals, beneficiaries can receive a death benefit, but these special policies don’t earn a lot of interest. Since hybrid policies are responsible for multiple things, they’re not specialized in any of the areas in which they operate. Many people consider this type of coverage a great perk, but little did they know it could cost them more than the benefits.
If you’re concerned about your health, for instance, and want to start ASAP, a well-managed Health Savings Account (HSA) is a much more suitable way to cover your future health needs. According to financial advisors, keeping your different investments and insurance policies separate allows you to fully reap their individual benefits.
14. Capitalize on the expansion of the world economy
If we’re being honest, all investments involve a specific level of risk. While some people think that the higher the right, the bigger the return, that’s, sadly, not true. A financial secret pros are more likely to keep for themselves is that very few people manage to get rich from stock market trading.
Different experts recommend that their clients keep the costs as low as possible so that they can maximize their chances of success. These costs include both management fees and risk.
15. They might not always have your best interest in mind
Sorry to burst your bubble, but there are other financial secrets that pros often keep to themselves. They may not always have your best interests in mind, so keep reading to find out more.
As you already know, several advisors earn a small commission from partnered companies for selling specific products to their clients. If they have a broker’s license, this is completely legal.
Furthermore, the commission is typically independent of the ultimate success of the investment, which results in advisors receiving compensation for placing your money in risky investments.
In this case, it’s wise to work with a fiduciary. These professionals are legally bound to always act in your best interest and must disclose any conflicts of interest with the products they recommend.
…There are still a couple of financial secrets we want to share. Trust me, you don’t want to miss these, so stick with us!
16. Stockbrokers want you to trade
Stock brokers will always tell you to trade whether you like it or not. They have plenty of methods to make the task seem urgent but don’t forget they’re paid on commission. Each time you buy or sell, they will make money, because that’s how they charge commissions. So, if your advisers tell you to trade all the time, ask them if there’s a financial secret in the middle. You can never know.
17. Don’t be afraid to ask
This isn’t a financial secret, but it’s worth mentioning: when you pay an expert to solve your money issues or help you with tips and advice, you’re trying to establish a trusting and loyal relationship.
According to some experts, you have the right to know whether the financial expert you’re working with receives payment through fee-only services or commission. Some investments are non-negotiable in price, such as annuities and mutual funds.
Advisors often have flexibility when it comes to fees for advisory (fee-based) accounts. Since managing $1 million isn’t significantly more expensive than managing $250,000, don’t hesitate to negotiate for a better rate!
18. Do you get what you pay for?
You’re probably used to hearing the phrase “You get what you pay for,” but it’s not always true. When it comes to money advice, things can be different, and that’s a financial secret not many experts are willing to share.
In some cases, clients get to keep what they didn’t pay for. As we’ve already said throughout this article, fees are the only thing you can control and predict in investing. That’s why it’s so important to focus on what you can control, like lowering your investment fees. Keep those fees as low as possible, and then make savvy financial moves to maximize your returns.
19. Your financial expert doesn’t have to be local
Many CPAs say that people tend to avoid collaborating with good advisors because they don’t live close by. While this was the norm a while ago, the financial service industry went through different changes throughout the years, and now you can find several remote business solutions.
For instance, you can collaborate with an advisor via Skype, texting, Zoom, or any other remote means of communication. If you want to work with someone specific, get in touch with them and ask if they’re willing to work with you remotely.
Do you know any other financial secrets experts are more likely to keep away from you? Let us know in the comments below! If you want to understand your money better and always make smart decisions, here’s a useful book for you.
If you find this article helpful and would like to check out something else from Frugal Americans, here’s a great post for you: Wasting Money: 5 Ways You’re Doing It Every Day
