Being in the Financial Services Industry, I often converse with other financial advisors. One thing I have found is that while all financial advisors are different with regard to their background, firm structure, affiliations, communication style, etc., one thing is the same: They all provide a service in exchange for a fee or commission. Two of the many services that financial advisors tout as their biggest value-add to you is the service of both investment management and financial planning. I have been in this business long enough to tell you that they are lying.
Don’t get me wrong, these services can be a great value to you. In fact, I might even venture to say that those two services are priceless in that they can help you feel confident about your long-term plans. However, these services are NOT the biggest value your advisor is providing you.
So what is?
Whether you realize it or not, your advisor is your “behavioral coach”. Your advisor essentially saves you from… YOU! Let’s be honest. None of us are perfect. We all make mistakes. We act on impulse. We make decisions based on emotion instead of reason. We fall victim to pleasing our “here and now” instead of our “later”. We are flawed because we are human. Your advisor is your voice of reason in those moments. Your guiding force. The little angel on your shoulder that quietly talks you into doing the things that are good for you and out of the things that will get you into trouble.
What kinds of things am I referring to? When you want to move everything to cash after a market crash, who convinces you to stay the course? Your advisor. When you are funneling your extra money into your kids’ college savings plans and not enough into your retirement plans, who provides sound reasoning for you to consider? Your advisor. When you are about to withdraw that lump sum from your IRA, who explains the consequences of this? Your advisor. When your buddy gives you a no-fail stock tip, who is going to give you the rest of the story? Your advisor. And when you are 1000% sure that you NEED that special car, who discusses how this affects your long-term goals? Your advisor.
So, to be clear, I am not saying investment strategies and financial plans are not important. In fact, I am saying they are extremely valuable! But what I am also saying is that often the biggest risk to your portfolio is you. And the most valuable service your financial advisor can provide is helping you get out of your own way.