Unless you’re in the top 1% of people that manage their own personal finances, chances are there is significant room to improve how you manage your finances, and particularly, your investments. This is where we, at G and S Insurance believe the value of a financial advisor comes in and the role they play in your investment success.
Most people are completely clueless about how and when they should invest for any goal, let alone a goal as massive as retirement. A financial advisor can guide youthrough the process, especially in an era where investing is not as simple as choosing between one product and fund anymore.
Let’s unpack some value adds your Financial Advisor offers you:
- Goal Building – Individual investors have a great deal of trouble establishing appropriate, realistic and manageable goals. Often, you don’t even know what you should be concerned with or what you should include as part of a list outlining what you want or need to accomplish. Financial Advisors play an integral role in assisting you with establishing, monitoring and tracking investment goals.
- Investment Policy Statement – A document that captures all your investment details. It’s also a communication device that instills structure and discipline. A good advisor will review the IPS annually with you. It’s a great tool in making sure investments have not drifted.
- Asset Allocation and Diversification. The exercise of allocating funds among various investment vehicles and asset classes is at the heart of investment management. Asset classes exhibit different market dynamics and different interaction effects. Thus, the allocation of money among asset classes and among investment vehicles within asset classes will have an enormous effect on the performance of an investment portfolio.
- Persistence. Establishing items 1, 2 and 3 works if everyone stays focused. Numerous studies demonstrate that certain investment characteristics can and do outperform with persistence over time (even though they can and do underperform for significant periods).
- Risk Management. Investment management looks to “stay the course” through all times and seasons. Proactive Management can adjust more effectively. It is smarter to protect against market corrections than to try to predict them.
- Behavioural Management. We are all prone to behavioural and cognitive biases that impede our progress and inhibit our success. We are flitting hither and yon is chasing after the next new thing, idea, strategy or shiny object. Since we frequently act too fast, a good advisor can also slow us down to allow us to “check our work.” A good advisor prevents the panic decisions made at the wrong time for the wrong reasons. Refocusing on pre-established goals keep us focused and expectations grounded.
- Productive Simplicity. Simplicity is a good thing, but with a careful qualifier. Per Einstein, the goal is to make things as simple as possible but no simpler. A competent advisor will know the difference. An advisor will take the time to sit down with you and explain what difficult terms and concepts mean to you and how they may impact your investment portfolio.
- Paralysis Analysis. The worst situations, many people find themselves in, are a state of “decision-making paralysis” and do nothing for fear of making the wrong decision. This path will almost always lead to guaranteed failure.
- Tax Efficiency and Planning. Experienced money managers routinely argue that you shouldn’t “let the tax tail wag the investment dog.” And it’s true that a poor investment isn’t often salvaged by good tax treatment. But tax efficiency still matters a lot and a good advisor providing the best approaches to dealing with taxes offers tremendous value.
- Financial Planning. Each item on this list relates to financial planning in one form or another. Yet consumers often mistake investment management with financial planning. Financial planning is much broader, involving far more than the managing of investments. It involves budgeting, goals, insurance, comprehensive planning for lifestyle, retirement, legacy and more. It also involves crisis prevention and management. Great investment advisors can be undone in a hurry with poor financial planning. A good advisor can work to help individuals formulate, monitor, adjust and meet their personal and financial goals. Real expertise is required to do so.
A last thought… If you’re thinking of investing in shares, unit trusts and other investments, you can go DIY but it will be riskier because these products are harder to understand than savings. There’s also a risk that you might lose money or buy a product that’s not suitable for you because you don’t understand it. So, you really need to do your homework.
Ask yourself these questions: Can you afford to lose any money? Do you have the time to do the research? Do you have much experience, knowledge or skills when it comes to investing? If things go wrong, are you comfortable taking responsibility for any bad investing decisions?
If the answer to any of these is ‘No’ then seeking financial advice might be your best option.
Ultimately, a good advisor can and will influence and even change your behaviour. In a world where personal financial issues have become increasingly and often unnecessarily complex, a good advisor can help you figure out what is true and what isn’t, what works, what matters, what is useful, and what can go wrong. There are few enough people with the expertise sufficient to begin to do that for themselves. Nobody can do it objectively. That’s why promising investment advisors are an absolute necessity.
We at G and S Insurance Consultants strive to the utmost to deliver great customer service and in return receive customer satisfaction. With this being achieved, we maintain our clients’ trust in the financial services G and S Insurance offers.