My husband died and now I need to take over the family finances. Should I hire the adviser who brings cookies and wants me to buy an annuity?

Dear Paul,

My husband died a few months ago, plunging me into a role for which, at 78, I have no training: overseeing our investment accounts. He always made the decisions, and I let him do so without argument. 

A good friend who knows a lot about investing and has known my husband and me since high school, recommends that I talk to his own adviser, who works for a highly reputable firm downtown.

However, several ladies I have met recently are recommending an adviser who makes house calls and even brings cookies.

I had one meeting with this woman. She suggested I sell my house, which I own free and clear, and then buy an annuity so I’ll have income to travel and do other things I want to do. 

Although my kids are skeptical of this woman, I’m more comfortable in my own home and I would rather not go downtown. 

My kids think I already have enough income to do that, and I don’t want to sell my house. But I’m not sure. 

—Seeking Advice 

Dear Seeking,

First, congratulations on owning your home free and clear and on having people in your life who care about you.

I’ll say at the outset that I don’t think you have anything to lose by taking the suggestion of your longtime friend by talking to his adviser.

One part of your question jumped out at me as a potential red flag about the adviser with whom you already met: No matter how popular she is among your friends (and no matter how good her cookies are), she is in business to make money.

For her to suggest in a first meeting that you sell your home and buy an annuity makes me think she’s more interested in earning a quick sales commission than in engaging in the thorough process of discovering your long-term needs and the best ways to achieve them.

And if your children think this woman is sketchy, I think you should pay attention.

Salespeople, like politicians, will sometimes say whatever they think will get them a sale — or win an election. Every financial adviser is thoroughly trained to look, sound, and act in a way that’s likely to give investors a warm and fuzzy feeling. 

In 1966, when I went into the brokerage business (I left after less than three years with a big Wall Street firm) I was told by a very successful broker: “We’re not in this business to make money for people. Our goal is to create a loyalty from our clients so strong that firing us would be just as hard as kicking a kid out of the house.”

When you’re shopping for an adviser, you certainly should look for someone you trust and feel comfortable with. But that’s just the start.

Some years ago, I wrote a book called “Get Smart or Get Screwed: How to Select the Best and Get the Most from Your Financial Advisor.” (You can get a free PDF copy here.)

Some of the tools in it include:

• questions to ask about the firm (which sets sales goals for its advisers),
• the adviser’s record, if any, of trouble with government regulators,
• the sorts of investments they recommend,
• and other services they may provide. (For example, many advisers will work without additional fees for a client’s young adult children.)

If your kids are willing, they can be a big help as you face this sophisticated challenge of finding an adviser who fully deserves your trust.

One excellent screening technique is to ask any prospective adviser to disclose how they are compensated and sign a statement saying that they operate as a fiduciary, and will prioritize your interests above their own.

Financial podcasters Tom Cock and Don MacDonald put together a form for just this purpose.

If an adviser won’t give you the basic information on that form, and sign it, you should immediately end the conversation.

Here’s another thing to watch out for: Many advisers who work on commissions act as if an annuity (which is an insurance product) is the answer to almost every need. They may also want you to believe you can buy an annuity without paying a commission.

That is pure nonsense, though many investors fall for it. The adviser always gets paid — and ultimately the investor is the one who pays. In a no-commission transaction, the commission is deliberately hidden in the fine print.

My advice: Take your longtime friend’s recommendation and talk to his adviser. Take one or more of your kids with you if possible; their “BS detectors” will be valuable to you. I encourage you to interview several advisers, you’ll probably learn a lot and it will help you to make a better, and more informed, choice for yourself.

If your kids are up for it, ask them to thoroughly read any papers before you sign. That could help you avoid a lot of potential — and very expensive — problems.

Remember: Before you hire any adviser, make sure you know how they get paid. Whoever pays the freight gets the loyalty. That should be you.

Have a question about investing? Send it to paul@paulmerriman.com. Although he can’t guarantee to answer them all in this column, Paul will read every one. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.



Richard Buck contributed to this article.

Paul Merriman and Richard Buck are the authors of “We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement.” 

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