Hiring a good financial advisor can be one of the best decisions an investor makes. To add to the complexity for investors, many professionals call themselves a “financial advisor,” however choosing the wrong one can cause more harm than good.
Why Hire an Advisor?
Choosing to hire a professional financial advisor can be one of the best decisions an investor can make. This complex decision requires answers to questions such as:
- Am I willing to do it on my own, and can I be successful?
- What value can a financial advisor provide?
- What should I look for when hiring a financial advisor?
As a financial planner at Human Investing, I am biased that most should seek the help of a professional advisor. Too many times we have seen investors have great intent, but fail in the execution, whether investing on their own or hiring the wrong financial advisor.
WHEN IT COMES TO INVESTING, THE STAKES ARE HIGH
Modern technology has made investing much more accessible, arguing that anyone can invest. E-trade’s 2008 Superbowl commercial claims investing is so easy a baby can do it.
E-trade is right, investing isn’t rocket science. But, for an investor, not knowing what the best opportunities are or how to avoid pitfalls can be costly.
A study done by DALBAR has shown that do-it-yourselfers can get by just fine, but highlights the excessive cost of doing so. Investing on their own, the average equity investor has underperformed the stock market over the last 20 years, by -1.51% annually. The impact is worse for an average fixed-income investor investing in the bond market, at -4.26% (typically a conservative investor). While anyone can invest, most investors fall short of the returns they should be receiving. It could have been more valuable to just put your money in the S&P 500 or Barclays Index and let it ride.
FINANCIAL ADVISORS CAN HELP NAVIGATE THE EVER-CHANGING FINANCIAL LANDSCAPE
There are plenty of cookie-cutter options that try to make investing more approachable, but there is no one-size-fits-all financial plan. A financial planning firm, like Human Investing, takes the complexity and optimizes it for the benefit of the investor and their family. Human Investing has the technology and expertise to build and execute the most complex financial plans.
We have witnessed the value provided by working with a financial advisor time and time again. Vanguard has found a way to substantiate some of our observations. Vanguard’s study titled “Advisor’s Alpha” quantifies that the value of working with a financial advisor can on average provide an additional 3% in value.
A GOOD FINANCIAL ADVISOR GOES BEYOND YOUR STOCK PORTFOLIO
While 3% cannot be expected annually, the study does identify the long-term value of partnering with a trusted financial advisor such as Human Investing.
So far, my focus has been on investments, however, a good financial advisor’s value is more than traditional investment advice and management. An advisor that provides comprehensive financial planning can help construct your entire financial picture.
SO WHAT DOES IT LOOK LIKE TO WORK WITH US?
We are a Fiduciary. We are legally bound to always act in our client’s best interest. That means no commissions or selling pressure. Professor Kent Smetters of the Wharton School of Business notes fewer than 2% of all financial advisors are Fiduciaries.
We believe that trust is earned from accountability and transparency. Whether someone has one dollar or one billion dollars, they should be offered the highest standard of care.
Our clients are hardworking, passionate, and motivated. We share the same standards when it comes to financial planning and service and equip our advisors with the highest level of credentials to serve our clients.
Each investor’s financial situation is unique, shouldn’t the advice they receive be as well? We listen before we advise, like a trusted doctor diagnoses before they prescribe.
THERE IS NO SUBSTITUTE FOR EXPERTISE.
Hiring a professional can be daunting; however, there is no substitute for expertise. As mentioned before, it has proved to be advantageous for investors to seek help from a professional.
I notice a parallel when looking at my family photos. As my wife and I look back over the years of snapshots, there is a distinct year when the quality of our photos dramatically increased. When it was just the two of us, snapping a photo with a phone while on a hike was easy, and the quality was simply fine. We could take as many photos as we wanted to capture the best shot.
Then our family started to grow: first a dog, then our daughter, and finally our son. With the added complexity that comes with a growing family, it was only a matter of minutes during photo shoots before our dog was chasing a squirrel or our kids began to wriggle free. We inevitably ended up with lower-quality photos that left us disappointed.
My wife and I decided to hire our friend Kaela, a professional photographer, to take our family photos, as the old DIY method wasn't working.
Kaela was able to do all the things we would have never thought to do or known how to do properly. She knew what we were trying to accomplish and had the technology and expertise to execute it. Kaela’s professional help also had its unforeseen benefits as well. She allowed us to focus on what is most important to us: our family. We were no longer stressed to take a family photo; instead we were able to focus on playing with our kids. The result was much better photos than we could have ever accomplished with a selfie stick.
It isn’t difficult to invest financially. Unlike with family photos, however, the stakes are higher when it comes to a family’s financial well-being. Hiring a good financial advisor can be one of the best decisions an investor can make. The value of hiring a good financial advisor will show in the form of better financial outcomes, as noted by Vanguard’s study. But the surprising benefits will come in the form of peace of mind, lower stress, and the bandwidth to focus on what is most important.
Will Kellar, CFP®
Will is motivated by the opportunity to serve hardworking people and their financial pursuits, through advocacy, problem solving and great advice. He’s a CERTIFIED FINANCIAL PLANNER™ practitioner who loves the feeling when our team makes a positive tangible impact in someone's life.
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Investment Advisory Services are offered through HUMAN INVESTING, in association with RIVERMARK COMMUNITY CREDIT UNION. The investment services and products are NOT FEDERALLY INSURED, NOT OBLIGATIONS OF, AND NOT GUARANTEED BY THE CREDIT UNION OR ANY AFFILIATED ENTITY, AND SUBJECT TO NORMAL INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.