Why Hire an Investment Advisor?
According to research from mutual fund giant Vanguard, investors who use an investment advisor usually experience returns of about 3% greater than an investor who doesn’t. Why is this the case?
First, a quality investment advisor invests their client’s portfolios with a sharp eye towards diversification and prudently managing risk. They should be continually monitoring and benchmarking their client portfolios against a pre-determined asset mix. Actually, the fact that adding investments whose returns are uncorrelated can decrease a portfolio’s risk while attaining the same return is a mathematical formula.
Second, a large part of an investment advisor’s value comes from their ability to leverage their expertise in the fields of investments, taxation, retirement and personal financial planning with their intimate knowledge of their clients’ lives. This is what is meant by comprehensive wealth management, as illustrated by my money program. The long-term result should be a maximization of client savings and wealth.
Lastly, an advisor should act as a “money coach” so that their clients have a trusted, neutral third party to guide their financial decisions, especially with regards to behavioral coaching. An advisor should help educate their clients and guide their behavior regarding their investments and finances. The latest academic research suggests that investors frequently do not act in rational ways that maximize their wealth over the long term. A top advisor helps their clients recognize potentially detrimental behaviors and works with the client to mitigate them.
Why Choose Main Street?
Simply put, I believe that my model of low-cost yet high-touch services offers the best value-for-money available today. Period. How is this accomplished? I ask you to remember three Fs:
A “fee-only” advisor is one that does not accept commissions for recommending certain investments or financial products. In this way my clients can rest assured that my recommendations to them are based solely on my professional judgment and not on a monetary incentive. This helps align the advisor’s interest with you, the client. My fee comes from the amount of assets that my clients entrust to my management, and my fee is below the national average. This doesn’t speak to the quality of my services, but rather to the outsized margins that my competitors in the industry have been earning for far too long. In other words, not really serving Main Street.
I have a fiduciary relationship with every one of my clients in every transaction. A fiduciary is always required to put the interests of their client ahead of their own. As a practical matter, being a fiduciary means that all conflict of interests between an advisor and client must be disclosed. A broker’s recommendations, in contrast, must only pass what is known as the “suitability” standard. Legally this standard is set at a lower bar than the fiduciary standard.
Of course my services cost money. I mean “free” as in independent. My shop is not beholden to any investment company, custodian, broker, insurance company, or tax and accounting firm. This means that I always only have my clients’ best interests in mind. This freedom also allows me to provide my clients with objective advice, without exception.
photo credit: Kip McGinnis