What Financial Advice is Not (or shouldn’t be)
It can be hard to explain what exactly it is you do as a financial advisor. It makes marketing hard. The best we can do is inform people of what we do, and when they decide they have a planning need, they think of us.
There are a lot of misconceptions about the profession. Many bad actors have hurt clients before. This makes people cautious about anyone offering financial help. So there can be confusion.
Before I start, I want to clear some of these up (or at least try to):
- We’re not all insurance salesmen. I, for one, am not. I am not licensed to sell you insurance. Salesmen may have big financial incentives to sell you a policy, even if you don’t need it. That is not to say I may not recommend insurance. Rather, I don’t get paid on commission.
- We aren’t stock pickers. Financial planner and investment advisor would both be accurate titles for me. I offer both planning and investment management. Different clients benefit from different services. I get asked by clients if I have any hot stock ideas. I tell them that isn’t my job. I use a blend of diversified funds to build portfolios that achieve returns and levels of risk the client is comfortable with. I make sure the money they are putting to work is in the right account for their goals.
- Trying to quantify our value by dollars in your portfolio is a short-sighted metric. Kinda goes hand in hand with the last one. We provide value to clients outside of portfolio returns. Insight, information, and peace of mind—these are hard to put a dollar sign on.
What Financial Advice Can Be
We aren’t just professionals with highly specialized knowledge. Depending on your situation, there may be investment options or strategies you aren’t aware of. Let alone have the time to implement or manage yourself. Having a professional with more knowledge on the subject can be beneficial. That’s not all we do and is sometimes the least important part of our job.
Any period of market turbulence can be an example of how having a plan can benefit you. Knowing what to do with your finances in all market conditions helps you stay on track. If you know you need to keep contributing $500 a month to your retirement account, those specific instructions can help drown out the noise.
Finally, if you do engage in ongoing planning (retaining an advisor for regular meetings and continuous planning), then you have someone you can call on in these times. A shoulder to cry on, someone to tell you everything will be all right. I’ve spoken to an investor who, before he met me, put a substantial amount into a single stock only for it decline double digit percent. I won’t get too grim here, but he made a comment that had me worried so I made sure he know there were resources available. I educated him that there were investment strategies we could use to help repair the financial damage. Most importantly though, I checked in with him regularly for a time and reminded him there are people that care about him.
In Summary
We provide advice on financial areas outside of your investment account(s). From time to time, we provide emotional support. There are many things you would have to assign values to and add up to figure out the quantified value we deliver. The easiest metric might be how you feel about the issues that drove you to seek a planner in the first place.
