I fully believe anyone can become a do it yourself investor. That you can make educated investment decisions over the course of your life. I also believe that most people need a financial advisor too. Here’s why?
There is the time and knowledge requirement to consider. Sometimes you just need a coach or teacher to get started. Or maybe you just need a second opinion to see if you’re headed in the right direction. Finally, investing is just one piece of a bigger financial pie.
The right financial advisor can guide you through the obstacle course of your life. Make adjustments as your family grows, put the kids through college, retire comfortably, and protect everything in between. It’s a lot to keep track of and manage on your own. But a great financial advisor will keep you focused on the big picture.
Before we begin a distinction needs to be made. There are a number of acronyms thrown around for financial professions. Some carry more weight than others. For the sake of argument, you should focus on Certified Financial Planners and similar designations that require testing, continual education, and a code of ethics.
There is a big difference between a designation requiring continual education and ethics training and one earned by passing a one-off test and paying a renewal fee every two years. While many people claim to be “financial advisors” only a handful have the certification and license to back it up. Just something to keep in mind when you look for a financial advisor.
Why You Need A Financial Advisor
All to often we view financial advisors as people who only dole out investment advice. Nothing more. When, in fact, they build a complete financial plan that aligns all your financial needs and goals. That plan involves:
- basic savings plan
- debt management
- investment planning
- asset allocation
- risk management
- retirement planning
- insurance protection
- college savings
- tax planning
- estate planning
These are the many hats an advisor wears. Their job is to look at every aspect of your financial life and build a detailed strategy that is fluid and flexible enough to handle all the changes you throw at it. I admit, some of these things you can do on your own. And if you can do it all yourself, than more power to you.
But will it be the best plan? And will it protect you from yourself.
That is the secondary role financial advisors play for their clients. Where they are more monetary therapist than financial strategist:
- to talk you down from the ledge
- to prevent and fix mistakes
- to push you to make those uncomfortable decisions
- and deal with any other financial freak out session
Some offices should come equipped with a psychiatrist couch or straight jacket. Because our behavior and mistakes are the biggest cause of financial failure. Anyone that can help put out the financial fires or prevent a meltdown is well worth the cost.
Why You Don’t
If you can do everything a financial advisor does then you don’t need one. That means, you can understand, review and objectively carry out your financial plan over time. You can stay emotionally detached from your situation. And most importantly you can build a unique financial plan around it.
A financial plan that satisfies your goals while protecting you and your family. A plan that involves savings and debt management, investment planning, allocation, and risk management for retirement and taxable accounts. A plan with insurance protection for you, your family, and your assets through life and death. And as your wealth grows you are forward thinking enough to build an estate plan and update it the moment things change – all while understanding the tax implications of everything.
If you can successfully do all that without second guessing yourself, you don’t need a financial advisor.