It's Not a Sales Pitch: The Value of Working with an Advisor

Kathy Longo, CFP®, CAP®, CDFA Tuesday, 28 March 2017

It's Not a Sales Pitch: The Value of Working with an Advisor

In a time when everyone is an expert or has instant access to expert advice through the internet, there are aspects of financial planning and investment management that are overlooked when determining whether to hire a professional or do it yourself. In addition to experience and credentials in financial planning and portfolio advisement, advisors are mentors to their clients who can often be the difference in setting and accomplishing long-term financial goals and falling short of those necessary benchmarks. Time is valuable to everybody, and there can be important benefits from leveraging the years an advisor has invested into providing financial and investment advice relative to the DIY hours to create or maintain a plan.

Goals

Arguably the most important (and perhaps the most overlooked) part of the financial planning process is the method by which defined goals are brought into focus, a clear path for achieving them is set, and a plan is put into place to follow that path. Goals based financial planning is holistic and requires support and trust, but it also requires a keen understanding of the implications that taxes, Social Security, portfolio rebalancing and asset allocation can have on our long-term plan and goals. In addition, it is very difficult for an individual to create a clear process to ask all of the questions required to identify their individual goals, much less turn those goals into a well-defined financial plan. It is even more difficult to effectively include considerations that encompass both spouses and/or the family. The advisor can foster a shared experience to create a more complete planning process while also serving as a financial partner if the DIY part of the family e xperiences an unexpected life event.

Support

There have been a number of articles written over the years comparing the success of active investors (both DIY individuals and professionals running large mutual funds) relative to market benchmarks. According to a summary of investor results, three key findings stand out: [1]

  • In 2015, the average equity mutual fund investor underperformed the S&P 500 by a margin of 3.66%.
  • In 2015, the average fixed income mutual fund investor underperformed the Barclays Aggregate Bond Index by a margin of 3.66%.
  • In 2015, the 20-year annualized S&P return was 8.19% while the 20-year annualized return for the average equity mutual fund investor was only 4.67%, a gap of 3.52%.

It is in our human nature to react when we are scared, excited or feel otherwise moved by something we have experienced. This nature creates the tendency to react quickly or overreact when there are disruptions, both large and small, in the financial markets. Having a relationship built on trust with a fiduciary whose expertise is rooted in not reacting emotionally to market shifts can help you stay on track with your investment goals through good times and bad.

Practical Skill

We often cannot see what we do not know exists. This is often the case for many of the clients and potential clients we work with who are trying to set or accomplish a goal and cannot seem to identify the right path to get there on their own. For example, some people may not think retirement is possible until they reach a specific dollar amount although there could be many other options available with effective planning. Whatever the case, a financial advisor has tools, based on a substantial amount of expertise in tax management, social security planning, insurance planning, retirement investment vehicles, etc. that can be used to help identify opportunities for assets to have a maximized potential. In addition to the advisor’s expertise, they have also developed important connections with financial partners (accountants, attorneys, bankers, etc.) and can act as an integrator of these services on behalf of the client to successfully accomplish their long-term goals.

For many of our clients, they will experience a big change like retirement, loss of their spouse, an inheritance or other windfall, and they aren’t quite sure where to begin. It isn’t that they don’t have enough or that they haven’t invested, it’s that they have a sea of choices and paperwork and emotions and they want to feel like they have a deep understanding of the decisions they make and the impact that those decisions will have.

A trusted financial advisor harbors the practical expertise and the strategic partnerships necessary to facilitate a smooth transition from a complex situation and provide clients with education and resources to evaluate and decide upon difference choices with quantitative and qualitative outcomes.

Though it can be tempting to take a DIY approach to investing and financial planning, it is important to understand the variables and risks that can be associated with this type of approach. With the help of a trusted advisor who can help you define your goals and provide you with the support you need to stay on track with your investment objectives, you might find yourself in a position where the cost of advice is substantially less than the cost of trying to fly solo.


[1] http://www.qidllc.com/wp-content/uploads/2016/02/2016-Dalbar-QAIB-Report.pdf

About the Author

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.

 

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