Protecting Your Nest Egg
By: Jane Stafford

By following a few simple steps, you can learn to protect your nest egg and its growth so that it will be there when you need it.

Educate YourselfThere are four websites that every investor should become familiar with; the websites for the NASD, the SEC (U.S. Securities Exchange Commission) and the Offices for the Securities Commission in Kansas and Missouri. If you take nothing else from this article, please save the following addresses.

1. www.nasd.com
2. www.sec.gov
3. www.sos.mo.gov/securities/default.asp
4. www.securities.state.ks.us/main.html

These websites are filled with educational information and tools helpful to all investors regardless of market sophistication. More importantly, these websites are updated regularly with market alerts on prevalent investment scams and news that investors need to know. If time is a problem, print off the information to read at your leisure. This information is too valuable to ignore.

Research Your Broker
With so many qualified brokers in the marketplace, it is difficult to pick the one who is right for you. When evaluating a broker and firm, do not base your decision solely on large advertising campaigns or word of mouth. Research your broker, your broker’s supervisor, the brokerage firm and the branch manager.

Almost every broker and brokerage firm has an industry report card that is accessible to the public for free. With only the name of your broker and their employer, you can find what licenses they possess, their employment history, their length of time in the industry and whether there have been any claims or lawsuits filed against them. On the NASD website, investors can run a free “Broker Check” report that is then delivered via e-mail. In addition, the state securities offices provide free broker profiles that have additional information about brokers and firms. If you do not have internet access, you can request this information by calling the NASD (800.289.9999), the Missouri Investor Hotline (800.721.7996) or the Kansas Investor Services (800.232.9580).

Be Wary of Variable Annuities In June, 2004 the NASD and the SEC issued a joint report condemning the rampant abuse of variable annuity sales. Variable annuities, which are similar to life insurance, are favored by brokers because they provide the broker with high commissions, but they are not appropriate for most investors. Whether a variable annuity is appropriate for you depends on your individual financial profile. Make sure you fully understand its features and the alternative choices before purchasing one.

Read Before You Sign
You have an obligation to yourself to read every document before you sign. It is not rude to read every document placed in front of you; it is smart. Make sure you have a complete document before signing and that you understand the terms used in the document. Remember, regardless of what anyone says, the written terms of a document constitute the most important piece of evidence for determining intent. If you do not understand something, get an explanation you do understand, even if it takes multiple inquiries and repeated explanations.

Understand Your Broker’s Role
The law allows brokers to call themselves many things including financial advisors, but this is somewhat misleading. Just as a BMW salesman is a biased “automobile advisor,” so are financial advisors who only sell investment products that their parent company manages. Financial advisors are not obligated to disclose their biases so make sure you ask plenty of questions and conduct the necessary research before you invest.

Be Diligent
Review your account statements for accuracy instead of just throwing them in an abandoned drawer. If you do not understand how to read your statements, ask your broker. If there are mistakes, make them known. Brokers are obligated to reverse transactional errors. Also, initiate periodic investment reviews. Only authorize trades in your portfolio that clearly benefit you and not just those that generate commissions for your broker. Lastly, if you think your funds have been mismanaged, speak up. The financial market is an excellent resource for preserving and growing wealth, but we all need do our part to keep the industry honest.

Jane is the managing member of Stafford + Associates llc, a full service securities law firm. Reach her at 816.931.1800.

Article Source: http://www.flourishmagazine.com