Good financial advice is like a road map. You don’t need one for driving around your hometown, but you do need a road map for long trips. Even when you are in familiar areas, you never know if something has changed since the last time you went by. Some people would rather guess which turn to make instead of getting or using a map. Whether it is an "ego thing," or that they simply don’t understand the dangers of getting lost, the risks exist.

These articles are for those people who appreciate that there are risks in making the wrong financial turn and want to find advice that will help them make the right decisions to get to their destination. It explains the different types of financial advice available and which source you can use to best meet your personal wants and needs. Sometimes you need only a quick answer, but at other times you may need to construct an entire financial plan and strategy. This guide is intended to show you the best direction, no matter your financial circumstances.

The cornerstone of financial advice is trust. Without trust, advice is quite worthless, especially because you are unlikely to use it. This series of articles will also help you to identify the sources of financial advice you can trust.

As with road maps, the advice you need depends on your familiarity with the area. If you have studied mutual funds, know how they work, know how to match your investments to your personal goals, and have the most recent research, you probably don’t need an investment professional to help you to choose a mutual fund or put together a portfolio. If you are familiar with the IRS rulings and instructions, you probably won’t need a tax adviser to do your tax returns. If you have a clear understanding of your many different financial goals and the interplay between them, if you can devise plans of action to achieve your goals based on sound assumptions about the future, you probably won’t need a financial planner.

Basically, you only need a road map if the road is unfamiliar. Likewise, you only need financial advice if you are unsure of how to manage your finances, or if you are unsure of how to best maximize your financial resources and investable assets so as to achieve your goals.

The financial world is constantly changing and it is impossible to make precise predictions. No one, including any of the nation’s leading experts, can tell where the financial road will turn tomorrow. You don’t know if interest rates will go up or go down. You don’t know if stocks will rise or if bonds will fall.

In general you make less money when you have predictability because you are not taking any risk. Even seemingly predictable things have traps that make them less predictable than you might think. For instance, on a fixed-rate mortgage, the rate and the payment may be fixed, but if you miss payments all bets are off. You might say that the payoff on a sure bet is usually small. The difficulty of making good financial decisions is borne out by the results of two separate studies. Terrance Odean, a behavioral economist, found that stocks sold by investors out performed the ones they bought in the year after the sale! Additionally, the Dalbar study of mutual fund investor behavior found that over a 12-year period, investors who switched in and out of mutual funds earned less than one-quarter of what they could have earned had they simply held on to their original investment.

We have discussed the value of good advice, but it is equally important to avoid bad advice. Bad advice can set you back as much as good advice can put you ahead.

Bad advice can take different forms, but by far the most common is well-meaning ignorance. Well-meaning ignorance occurs when the adviser makes recommendations without having learned about your personal needs and goals.

One example of this is the well-meaning adviser who recommends a long-term investment without knowing that you will need the money in a few months! The choice is wrong, but with well-meaning ignorance, the adviser did what he/she thought was right.

One very important step in spotting bad advice is to assess what the adviser knows about you. The risk of well-meaning ignorance is greatly reduced when the adviser knows you well. The advisers who give advice first and ask questions later are likely to be guilty of well-meaning ignorance.

Bad advice is also characterized by fun and excitement. Bad advisers often make investing sound like gambling rather than the work it very often is. Indeed, good advisers take the time to ask you uncomfortable questions which are oftentimes neither fun nor exciting. By contrast, bad advisers will skip right to the action.

Good advisers will want you to stay the course when the markets are down, but bad advisers will tell you to get out and put your money somewhere else. Good advisers will usually talk about prudent asset allocation and diversification, but bad advisers will talk about doubling your money and once-in-a-lifetime opportunities that require immediate decision making.

Bad advice can do more damage than lost opportunity, since it can obligate you to commitments that you don’t want. Take the familiar case of the financial analysis that shows it is less expensive to buy a house than to rent. The question of risk seldom enters into the discussion, but it should; what are the chances that you will expand your family or change jobs? These considerations could make buying a house a bad idea, even though the financial analysis makes purchase seem attractive.