What you should be getting from a financial advisor
Financial advisors are no longer strictly needed just for asset allocation and fund selection, but should play an important role in mentoring and providing someone to trust in an industry built on money.
In an age of rapidly developing technology, online trading platforms and endless information readily available on the smartphones we always have with us, one might ask, “What value does a financial advisor bring anymore?”
Just as they’re shaking up such industries as medicine, law and banking, the advance of technology and the spread of once-privileged information are changing the game in the investment world. But the change may not necessarily be for the better.
As a humorous example, I’ve made a personal decision to never look at WebMD again after becoming convinced that I was suffering a serious illness when the real culprit was nothing more than a backache, indigestion or a headache. More information sometimes makes things cloudier rather than clear. Unfiltered information can also be overwhelming, and it’s difficult to verify that our sources of information are not biased.
In finance, as in any industry, it seems like almost everyone has an agenda to push. Is it better to use a fee-based or commissioned advisor? To work with this custodian or that one? The list goes on. How does the average investor — someone who works full time and has a family and other individual responsibilities — find the time to do independent research, verify the source, implement a strategy and monitor the results? At the very least, that would be extremely difficult. Good financial advisors do these things for their clients.
But advisors today should also go beyond the numbers. The most gratifying moments in my career have not come from conducting a risk profile questionnaire or explaining why we feel our portfolios are fundamentally better than anyone else’s. No, the best moments have come when I’ve discussed clients’ goals with them and uncovered personal objectives that they perhaps had never even articulated before. And then I’ve been able to show, after hours of work and with demonstrable accuracy, that they are within reach of accomplishing the things most dear to them. The best moments of all come when we’re able to show our clients that they’re actually well ahead of where they would need to be to reach their goals.
These moments often lead to conversations about how to use their wealth to make a true impact on their family or their community. Such moments are made possible by a personal connection between advisor and client. They require trust between the two parties to even have a chance to occur. It takes a deeper level of communication that involves far more than analyzing data.
Advisors should be a guide and, in addition to answering your questions, should raise questions that you haven’t yet considered. We should help you determine your life’s most intimate objectives. We should be a confidant and a sounding board while helping you make sound, logical decisions based on those objectives. An advisor should be a connector between you and other ethical professionals if you are in need. Perhaps most important, an advisor should be someone you trust to help your spouse and/or children move forward if you’re not around anymore.
In times of uncertainty or volatility, advisors should help investors avoid making mistakes that harm their chances of financial success. Advisors should offer guidance in areas outside of a single investment account, including pension and income planning, Social Security planning, insurance planning, tax planning and so on.
This is what the advisor of tomorrow will be known for. The advisor’s role needs to go beyond asset allocation and fund selection. When it does, then that’s why you would hire one.
Learn more about Joe on NerdWallet’s Ask an Advisor
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