After two decades in this business, one of the most common questions I hear is, why should someone hire a financial advisor? Why should someone pay for this service that my team provides? These questions frequently come from DIY investors who work part-time as their own advisor, whether or not that’s something they’re trained for (it never is).
Let me tell you something – I don’t do my own taxes. I don’t paint my own house. I don’t attempt to fix household issues that involve water…or electricity. I leave those things to the pros who are properly trained and know what to do to keep my tax bill in check, my paint lines smooth and my family safe from standing water or fire hazards. Now I know there are plenty of home-improvement weekend warriors out there who do amazing work. More power to you. But even those folks know when to call in the pros, and so do I. I know my limitations.
Now, say you’ve decided you do want to get a professional opinion on your investment portfolio and long-term financial goals. That’s great! However, just as we know that not all plumbers or electricians are created equal, financial planners can take different approaches to your money.
If you are considering seeking professional advice, one of the most important things to understand about our team at Family Financial Partners is that we strategize for up and down markets. There are some advisors who will do an asset allocation for you, putting your assets into a variety of investments, and simply hold them for the foreseeable future, only adjusting that strategy if you need to liquidate those funds. Ups and downs in the market have no bearing on an overall strategy of buy and hold. And there’s nothing wrong with that, if that’s what you want. Other advisors are more active – many hire secondary asset managers who manage your portfolio in a less transparent manner. Because these are based solely on whether the markets are up or down, you’ll love that manager when the markets are good and fire them when things are down.
Then there’s the way we manage money. I’ve been at the investment game long enough to have tried both of these approaches. In strategy A, as long as you hold in a down market, you should be fine when the markets eventually recover. In strategy B, as long as the asset manager makes the right decision in a falling market, you should be okay. That’s a lot of “shoulds,” however, and you may become fearful due to that lack of transparency. It’s scary to see your portfolio falling when you don’t know why. It’s easier when you can see that you’re invested in good companies that are just having a bad day.
Our strategy for all of our client families is to own investments that are reasonably easy to understand, provide for liquidity if you need it, and provide complete transparency when answering the question of “what do I own?” Then, to create a portfolio customized for you, we simply figure out how much risk you’re willing to take – beyond just gains and losses. What are your lifestyle goals? What do you want your money to do for you? Can you be patient? Do you want to use up all your money in your lifetime, or pass it on to future generations?
Then, we help you select a portfolio that meets your needs, so you know what you own and why. We try to take the fear out of investing. Most importantly, we actively manage those positions for all of our client families, in real time. If there’s a change in anything – not just the overall market – we can try to determine if it’s just a bad day, or if it might be the start of something bigger.
Whether you’re working with another advisor or you’re a DIY-er, take some time to look at your portfolio and its performance over the last year. It might be time to give us a call. At the end of the day, when you select a financial planning team, it’s your call and it’s your money. At the same time, I do believe in the benefits of working with a growing financial planning practice like Family Financial Partners, with a growing staff that has youth on its side, and a high commitment to service. Remember, first meetings are always free, and a second opinion never hurt anyone. Give us a call – we’ll keep the coffee hot.
All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. For advice appropriate to your specific situation, please consult a financial professional.
Article by David Smyth, Senior Partner at Family Financial Partners — a financial services firm in Lexington, Kentucky.
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