By William Postma – Associate Wealth Advisor
Why work with a financial advisor? It’s simple: They’re experienced in their field. Every person on the planet is good at something, whether it’s health care, building, sewing, etc. Each person has their own strengths and weaknesses.
Personally, I’m good with numbers. On the other hand, I’m a terrible doctor. Sure, I could use WebMD to diagnose myself, but the chances of me “self diagnosing” something that is not actually an issue is likely very high. Not to mention, my “diagnosis” would likely come with a “one week to live” notice.
Instead of trying to figure out what’s wrong myself, I’m going to go to a doctor to get an accurate and quick diagnosis. Like working with a doctor, there are many reasons to work with a financial advisor. Here are my top five:
1. Are you going to do it?
Life is busy. Most of us have families, homes, hobbies and many other things that take up our time. Dedicating time to make sure you are invested properly, your plan is on track and your risks are mitigated can be very time-consuming.
Life changes, which mean your plan will change, and the risks you mitigated might be different and possibly not even applicable anymore. Not to mention the market fluctuates, positions can become unfavorable and policy is constantly changing.
If you manage every aspect of your financial plan on your own, do you have the time to keep up with it and still enjoy the other parts of your life? If the answer is yes, then great! But I would be willing to bet that the time put into your financial plan is less than it needs to be.
2. Too many choices
There are somewhere in the neighborhood of 10,000 mutual funds and exchange traded funds. Which do you pick? Is it the right fit?
When we were picking out our first car seat for our daughter, we were overwhelmed with the choices available. Which one was best? What were the features and benefits of each? The same can be said about picking investments. What exposure do you want to in each sector? What funds or stocks and bonds make sense for what you are trying to accomplish?
Not only will financial advisors and their firms typically do the due diligence for you, but they will continue to analyze investments to make sure they are the best fit for the situation. If one investment falls out of favor, changes will be made.
3. Lack of experience
Back to my joke about being a bad doctor – I don’t have the experience, knowledge and resources to make an appropriate diagnosis to any ailment I have. Financial advisors do this every day, and have to take hours of continuing education and keep up to date on what is happening in the market and with legislation.
Advisors, like doctors, surround themselves with experience and individuals who know a lot about a very small niche in investing and planning. It is absolutely OK and probably best for your financial situation to accept the fact that you do not and will not know everything about planning and investing. A good financial advisor will bring new information to your attention and continue to make sure your plan and portfolio are as efficient as they can be.
4. Information overload
Also commonly known as analysis by paralysis. If you have spent any time researching anything in the market, you know there is a mountain of information to sort through. What is your strategy when it comes to picking a fund? What is a fair value? When do you buy? When do you sell?
Having ample information is important in making decisions, but having too much often stumps investors and can make it nearly impossible to make the correct decision. Working with a financial advisor can help you sort through the available information.
Oftentimes, advisors also work with a large support team that can help them make good decisions and verify why those decisions were made. Advisors will also help you sort through the bad information and noise so you can focus on what is important in making a decision.
5. Behavioral finance
This one is my favorite. I used to work with self-directed investors. The constant theme I would see is selling the lows and buying the highs.
A good financial advisor will walk you through what is going on with the market and legislation, and talk with you about the risks associated with their recommendations. A good financial advisor will also help you think through any personal biases you may have.
You might have lost money in the 2008 housing crash, but that doesn’t mean you should sit on cash for the rest of your life. The S&P 500 completely recovered in about five years, and everything since then has been additional growth. Working with an advisor gives you an additional resource to bounce thoughts and ideas off of – a gut check, if you will. Advisors are here to help you make the best decision for you and your family with the available information.
Like I mentioned above, there are many reasons to work with a financial advisor. Have questions about what that would look like? Reach out to an advisor today!
Investing in mutual funds is subject to risk and loss of principal. There is no assurance or certainty that any investment strategy will be successful in meeting its objectives.
Exchange-traded funds and Mutual Funds are sold by prospectors only. Investors should consider the investment objectives, risks and charges and expenses of the mutual fund or ETF carefully before investing. The prospectus contains this and other information about the product. Contact your Registered Representative to obtain a prospectus, which should be read carefully before investing or sending money.
