DIY Anyone?
Recently I wrote about investors who have an advisor obtain much better results over time than those without one. I referenced the study by Vanguard about this, but I have noticed a newer one by the Russell Investments organization today. It attempts to quantify how much value can be added by an advisor to your overall results over decades.
As you know, rules are quite important and therefore, lawyers do actually rule the world! (Tongue firmly in my cheek.) The material I found states plainly that it is for Financial Professional use only. That warning marked on each page is from the legal staff of Russell. Therefore, I will not share the website address with you, but the search engine folks will help you find it if you wish.
I have never seen a value quite this high, but Russell opines that having an advisor may be worth over 5% from its 2023 calculations. The study lists four different factors by which this may be true. They include active portfolio rebalancing, behavioral coaching, customized team planning for the family, and tax planning in investing and decisions.
Russell says this is the case in spite of (or also perhaps because of) the incredible change of circumstances we have seen in the past ten years. One reason I love this field is the constant change. In celebrating my 42nd anniversary in financial services as of February 1, I find it just as fascinating as I have since my teenage years.
This is admittedly self-serving on my part to discuss advisor value, but how do you choose a particular advisor when you decide to hire one?
Here, we can find a public article giving factors you may want to consider. It may be found at https://www.forbes.com/advisor/investing/how-to-choose-a-financial-advisor/ and is written by Rae Hartley Beck, a Forbes Advisor editor. She cites the view of the National Financial Education Council that the average American suffers a cost of $1,200 per year by simply lack of knowledge of the subject.
First, what kind of financial help do you need or want? Good question, but I find that I often do not know what I do not know. So in the world of internet, I suggest you spend a little time on researching this. Is it primarily investing help for you? Do you have children or grandchildren you want to help with higher education costs? Or is it having a good plan on paper covering the risks you will encounter during the rest of your earthly life?
Second, learn the difference between types of advisors by their source of income. In the past, I have discussed the primary difference between those compensated by commissions and those who are paid by a fee from you. Either way can be appropriate. If you buy good products such as mutual funds with a front-end commission and hold them for long periods, this is probably the cheapest way to invest and still have help.
The other means is through a Registered Investment Advisor whom you pay directly. They are under fiduciary duty to recommend and take whatever actions are in your best interest, regardless of how that affects their income or that of their firm. Lawyers, CPA’s, bank trust officers have the same standard of care. There are fewer still advisors who only charge you an hourly fee for whatever work they perform strictly on your behalf.
However you decide, you will usually travel a safer path by getting advice from others, no matter what area of life’s business. In this case, I would probably not suggest it be your next door neighbor. The article mentioned ends with a fine list of questions to ask a potential professional advisor. Due to space limitations, I will let you find that. Or send us an email or call and we will provide them to you.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)