Insights + Resources

Why Having a Financial Professional Matters

Aug 30, 2019

Professional Teaching
A good professional provides important guidance and insight through the years.

What kind of role can a financial professional play for an investor? The answer: a very important one. While the value of such a relationship is hard to quantify, the intangible benefits may be significant and long-lasting.

There are certain investors who may turn to a financial professional with one goal in mind: the “alpha” objective of beating the market, quarter after quarter.

At some point, these investors may realize that their financial professional has no control over what happens in the market.They may come to understand the real value of the relationship, which is about strategy, coaching,and understanding

A good financial advisor can help an investor interpret today’s financial climate, determine objectives, and assess progress toward those goals. Alone, an investor may be challenged to do any of this effectively. Moreover, an un-coached investor may make self-defeating decisions. Today’s steady stream of instant information can prompt emotional behavior and blunders.

No investor is infallible.

Investors can feel that way during a great market year, when every decision seems to work out well. Overconfidence can set in, and the reality that the market has occasional bad years can be forgotten.

This is when irrational exuberance can creep in. A sudden Wall Street shock may lead an investor to sell low today, buy high tomorrow, and attempt to time the market.

Market timingmay be a factor in the following divergence: according to investment research firm DALBAR, U.S. stocks gained 10% a year on average from 1988-2018, yet the average equity investor’s portfolio returned just 4.1% annually in that period.

A good financial professional helps an investor commit to staying on track.

Through subtle or overt coaching, the investor may learn to take short-term ups and downs in stride and focus on the long term. A strategy may be put in place, based on a defined investment policy and target asset allocations with an eye on major financial goals. The client’s best interest is paramount.

As the investor-professional relationship unfolds, the investor may begin to notice the intangible ways the professional provides value. Insight and knowledge inform investment selection and portfolio construction.The professional helps explain the subtleties of investment classes and how potential risk often relates to potential reward.

Perhaps most importantly, the professional can help the client get past the “noise” and “buzz” of the financial markets to see what is really important to his or her financial life.

The investor may gain a new level of understanding, a context for all the investing and saving. The effort to build wealth and retire wellis not merely focused on “success,” but also on significance.

This is the value a financial professional brings to the table. You cannot quantify it in dollar terms, but you can certainly appreciate it over time.

Tags:

More Insights

May 27, 2020

In corporate America, pension plans are fading away. Only 16% of Fortune 500 companies offered them to full-time employees in 2018, according to Willis Towers Watson research. In contrast, legal, medical, accounting, and engineering firms are keeping the spirit of the traditional pension plan alive by adopting cash balance plans.1

May 25, 2020

I’d like for you to meet my friend, Hugh. He’s a retired film stuntman who, after a long career, is enjoying his retirement. Some of what he’s enjoying about his retirement is sharing part of his accumulated wealth with his family, specifically his wife and two sons. Like many Americans, Hugh likes to make sure … Continue reading “The Gift Tax”

May 22, 2020

“Never confuse a single defeat with a final defeat.” — F. Scott Fitzgerald The economic struggles in our country are among the worst we’ve ever seen. In April, a record 20 million people lost their jobs, and 36 million people have filed for unemployment since the COVID-19 pandemic struck in mid-March. Record drops in consumer … Continue reading “Better Times Are Coming”

May 20, 2020

You can sum up the appeal of a Roth IRA in three words: federal tax benefit. Potential earnings in a backdoor Roth IRA grow tax free as long as the owner abides by the Internal Revenue Service (I.R.S.) rules, and withdrawals are federally tax free once you reach age 59½ and have held the Roth … Continue reading “Backdoor Roth IRA”

May 18, 2020

Inheriting wealth can be a burden and a blessing. Even if you have an inclination that a family member may remember you in their last will and testament, there are many facets to the process of inheritance that you may not have considered. Here are some things you may want to keep in mind if … Continue reading “Coping With An Inheritance”

Insights + Resources >