Let’s start with the basics. A financial advisor’s role should be to provide clients with objective financial advice in a fiduciary capacity. The word fiduciary is essential because it outlines specific legal and ethical standards your advisor must abide by. Fiduciary financial advisors are bound to work in your best interest when offering advice. Before you decide an advisor is right for you, I recommend confirming they are a fiduciary, as that should provide the best reassurance that they are working for you and your goals. At One Day In July, all financial advisors act in a fiduciary capacity for all clients they work with.
Those just getting started may have a more simplified financial picture or may not have a lot of assets; they may feel that they have no need for or are not “wanted” by the financial industry. However, while a simple financial makeup may be easier to understand, it’s your goals and objectives that should determine the need for an advisor. Those needs only increase as your financial picture gets more complicated (children, retirement accounts, inheritance, education, trusts). Financial advisors help clients get where they want to go and provide advice given the client’s objectives and risk tolerance. Advisors broadly view markets, personal finance, tax implications, and complex life events. No matter how simple or complicated your current financial situation is, if you are seeking to plan your financial future, then working with a financial advisor can help.
Your understanding of the world of investments, retirement accounts, tax implications, and education savings (to name a few) will dictate the need for outside advice. A financial advisor can bring a steady and knowledgeable approach to those who are uncomfortable or want reassurance in their path. Even for those with extensive investing experience, a financial advisor can bring new considerations and keep you on track during complicated life events.
Time poverty is a genuine concern: managing your investment accounts can take up time that could be spent elsewhere. Consider an investor with multiple IRAs, education accounts for their children (or grandchildren), and a brokerage account. That’s a lot of management to undertake without even considering complicated trust accounts, rollovers, tax season, or other situations. The path to financial freedom should include more time to do the things you love, and an advisor can help give you more of that time.
Many investors make critical mistakes that are influenced by their emotions. A solid, well-thought-out investment strategy should not have you poring over data, watching the markets constantly, or trying to “time” the market. That’s the way to lose a lot of money. For a great article on market timing please read this one1. Your emotions can be “removed” from the equation with a good plan and a fiduciary advisor committed to your objectives. Why is that a good thing? Investors who make emotional decisions with their investments tend to sell low and buy high, precisely the opposite of what we want. An advisor will reassure you to stay the course and remind you of your long-term goals. In times of market turmoil, this can be invaluable.
The decision to employ the service of a financial advisor is very personal and can be complex. Consider the advantages outlined above when making your decision:
1. “2020- A Case Study in the Futility of Market Timing” onedayinjuly.com, February 18, 2021
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