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Investing Can Be a Real Beach Ball

beach ballWhile my family and I have been enjoying our summer, I’ve been inspired by some of the ways our outdoor activities remind me of investing. Then again, given my profession, there’s not much that doesn’t remind me of investing.


For example, check out this beach ball we purchased. The first six words are in English, with the rest no doubt saying the same thing in a litany of languages:

“WARNING! USE ONLY UNDER COMPETENT SUPERVISION.”

Legal fine print has found its way into our summertime fun time… with about as much impact as it has anywhere else.

It’s not that the warnings are pointless. Like any parent, I really do try to keep a close eye on my kids; it’s hard to ever completely relax while they’re frolicking, care-free in the sun. It’s my turn, I guess, to do as my parents did for me.

The problem is, whether it’s on a beach ball or in a financial report, critical information is too easily lost when it gets buried in a ton of text. For example, here is a screen grab of the fine-print at the end of a prospectus for one of the world’s largest and most popular mutual funds (with identifying information removed). These are just the disclosures about the disclosures, mind you. The prospectus, which is one big legal disclosure itself, is just under 50 pages long.

Disclosures

Similarly, Registered Investment Advisor firms are required to publish what is known as a Form ADV Part 2 Brochure, with a litany of required disclosures. There’s also FINRA’s BrokerCheck, where you can check out any broker’s background.

For a financial nerd like myself, these documents offer rich resources that help me dig way beyond the slick promotional materials to objectively assess the true worth of a fund or a firm.

A fund’s prospectus helps me understand important details such as what actual costs to expect, how its managers really plan to invest shareholders’ assets, and what other features or “gotchas” are worth being aware of.

A firm’s Form ADV and FINRA BrokerCheck reports also can be very telling if you know what to look for. What is the firm’s fee schedule? Who are its principals and what are their backgrounds? What is its detailed investment strategy? Are there any disciplinary actions or conflicts of interest that might warn you off from doing business with them?

Unfortunately, while these legal documents may disclose everything there is to know about an adviser or a firm, the content usually goes unread and unheeded. There is just too darn much of it. When you’re handed a beach ball and the cool, blue water awaits, who has the time or inclination to read all about the potential dangers?

I do encourage you to take the time to read those legal disclosures for yourself—the ones that accompany your investments and your adviser relationships. The more of them you read through, the easier it gets. Really.

But I also like to think that this is one way I can come in as an advisor dedicated to serving my clients’ highest financial interests. My aim is to help families achieve their financial goals while avoiding as many of the financial risks as possible. One of the ways I do this is by helping investors cut to the chase of what they most need to know about the financial ocean, and providing clear answers about legal language that may otherwise be difficult to decipher.

Now get out there and enjoy the rest of your summer!

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