Don’t go it alone

Don’t go it alone

Why working with a financial advisor is key to your financial well-being

James Taylor CFP®Working with a financial advisor is key to your financial well-being, Wealth Counselor

Shortly after the 2016 presidential election, I received a frantic call from a client. He and his wife wanted to sell all their investments and move to cash. “We are so close to retirement, and we don’t know if we can go through another 2008,” they said. They were afraid that the nest egg they had worked so hard to build and grow was at risk. After 30 minutes of discussing the well-diversified holdings in their portfolio and why they own them, I reminded my clients about the long-term perspective we had carefully developed for their financial plan. They calmed down and realized staying the course was the best strategy.

Here we are, more than a year later, and the US markets are up well over 30 percent, developed foreign markets are up even more, and emerging markets have skyrocketed. Had my clients moved to cash they would’ve missed out on these gains. We also would’ve had a tough time deciding when to get back in. My client’s reaction was typical and highlights a key issue: The average investors’ biggest enemy isn’t cost. It isn’t the choice of the investments. It’s emotions. Simply put, time in the market is more important than timing the market.

You might be thinking, that’s not me. I can do it myself and stay the course. I know what to invest in, and I have my emotions in check.

Ok, fair enough. Perhaps, unlike my client in this story, you stuck it out after the 2016 election, but what about during the 2008 financial crisis? What about 9-11 and the dot-com bubble in 2000? A study by Vanguard revealed that the average investor acting alone could underperform the market by several percent1. A main reason for this underperformance is not because investors are financially uneducated, but because their emotions lead them to make knee-jerk reactions at the worst possible time (see client referenced at the beginning of this story).

Working with a financial advisor is a lot like flying somewhere for vacation. The pilot maps out the flight plan by considering the distance, how much fuel will be needed, who the crew is on their team, passenger safety, and the mechanical and technical state of the plane. A financial advisor does the same thing by creating a wealth management plan before we get on the plane and take off toward your financial future. Along the way, we may hit a little turbulence, and potentially have to weather a shaky landing, but in the end, we strive to reach the final destination — your financial goals.

Think of each of these goals as a plane ride, and each year we invest in them — not just with money —but also with time. We revisit our planning assumptions and make sure we are staying on course. We ignore the turbulence because it is normal. We don’t measure the distance of our trips with a 12-inch ruler, but rather, in miles. The same is true for your investments. As we make sure your portfolio is well-diversified, we are managing investment costs, just as an airline manages its fuel costs. We don’t worry about media headlines (turbulence and noise) because there will always be a new president, Brexit, China, global warming, or North Korea to distract us if we let them.

The United States and the entire world has experienced many, many complex events — The Great Depression, World War II, the Vietnam War, the Cuban missile crisis, the cold war, stagflation, oil wars, trade wars, the Gulf Wars, the tech bubble, Y2K, and the Great Recession, etc. Here we are in March 2018, nine years removed from the bottom of the last market crash, with the market near all-time highs.

What does this mean for you? Don’t be fearful and don’t fly the plane yourself. Find a fiduciary financial advisor  that will work with you to design an investment portfolio and wealth management plan to help achieve your long-term goals and objectives. Take the emotion out of the process and filter out the noise. Allow a financial advisor to watch out for wind and bad weather, and re-route your flight path, if needed. A good financial advisor will be honest and transparent with you. Most importantly they will help get you to your destination, whatever that may be.

1 Francis M. Kinnery, Jr. Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha: Sept. 2016.

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