There’s an ongoing debate among retirees and pre-retirees: Is it really worth the money to pay someone as a financial advisor? Won’t I do better just buying low-cost index funds and doing it myself?
I’ve been investing for 40 years and advising clients as a licensed fiduciary (I always put my clients’ best interests ahead of my own) for close to 20 years. I’ve heard all the arguments and read all the articles in financial publications. In my day-to-day life, it comes down to two principles that guide me: my time is my most precious commodity, and I hold professionals in very high regard. Let’s look at the value of time first.
I work hard and really value my “downtime.” I see clients nearly every Saturday but keep Sundays free for myself and my family. If my dishwasher is broken, sure, I could watch 16 YouTube videos on how to fix it on a Sunday, make 2 trips to Home Depot and spend a couple of hours cursing and getting frustrated before I finally give up and decide to call the repair person first thing on Monday morning. Or I could sit in my favorite corner with a good book and a cup of tea, go for a walk with my husband, or spend time catching up on the phone with my daughter who lives in Atlanta, knowing that a professional will be there first thing Monday morning to make everything right.
The gift of time that I give myself to relax or connect with family or friends is well worth the price I have to pay. Then there’s my respect for professionals. I’m educated and reasonably bright, but I will never stack up to someone who has honed their expertise repairing dishwashers every day for the last several years. Every single time, they will do a better job in a shorter amount of time.
It’s the same thing with financial planning and investing. You may have all the best intentions in the world, but are you REALLY going to spend the necessary time researching, analyzing, staying abreast of current laws, and doing the ongoing study necessary to get the best results with your financial resources?
In 2019, a study by Forbes found that the greatest risks facing investors are factors that weren’t even on their radar. Just like me and dishwashers, I don’t know what I don’t know. A financial planner can also help you with complex financial decisions like whether to elect a monthly pension or a lump-sum distribution at retirement, when to start taking social security to maximize your lifetime benefits or whether to invest or pay off a mortgage with idle cash sitting in a savings account making less than 1%.
Another thing you need to consider is that we are all emotional creatures, and, therefore, emotions can sometimes crowd into our investment decisions. We’ve all heard the old maxim: “Buy low, sell high.” We may embrace that on an intellectual level, but when cable news is screaming that the markets are tanking, your friends are telling you that “the smart money” is going to cash, and one glance at your 401k account balance makes you break out in a sweat, all that “wisdom” goes out the window.
I can’t tell you the number of people who called me in March 2020, wanting to go to cash after we all entered “lockdown.” This had never happened to anyone before, and everyone was in a panic. Here’s the thing: the only folks that lost money were those who acted on those “paper losses” and sold. If you held on, the S&P 500 not only made up its losses for the year but was up a fantastic 16.3%!
The same thing happened in 2008 during the Great Recession: if you stuck your account statements in a drawer without looking at them and just gritted your teeth, you would go on to participate in the longest-running “bull market” in history. If you can find a financial advisor you trust and respect, she or he can help save you from poor decisions that make perfect sense to you at the time.
Vanguard did a study in 2019 among 58,000 investors who were in “self-directed” (DIY…no financial advisor) accounts. Over 80% made one or more strategy changes to their account between 2008 and 2012, and their overall average portfolio value change was a loss of 8.00%. In the same Vanguard Advisors’ Alpha Study in 2019, those investors who worked with an advisor earned an additional 3.00% return on their accounts than those who chose to work independently.
In 2018, John Hancock determined in a study that 70% of those who worked with a financial professional are either “on track” or ahead of saving for retirement versus 33% of respondents who don’t use an advisor. Further, those who didn’t have a written retirement plan had an average of $ 45,700.00 saved for retirement, while those who had partnered with a financial planner on a written retirement plan were sitting on an average portfolio value of $ 203,000.00.
My goal with every client is to partner with them to craft a plan that addresses their story, goals, the people they love, and the things that keep them up at night. Won’t you consider letting me be the “captain” of your retirement journey? Contact me at email@example.com or call me anytime at 563-949-4705 to schedule your complimentary meeting on what we might accomplish together.