Making the decision about when (or if) to hire a professional financial advisor can feel like a big one. At first glance, it may feel unfamiliar and potentially uncomfortable to think about paying someone to manage your money if you’ve been relatively successful in doing so on your own.
But that’s where it’s important to probe a bit deeper – to understand what exactly defines investment “success” – whether it’s on your own or with an advisor. Many people only compare the results of their portfolio to the S&P 500. This overlooks the level of risk involved, and does not consider how a portfolio may perform through a variety of market conditions (i.e. up markets as well as down markets).
Often, we hear from people that they’ve defined success as “not underperforming” the market. Essentially, they’ve defined the success of managing their own money as just not messing up. As a result, they tend to use a combination of some of the following tactics:
Heavy concentration in index funds
Large sums of money in bank CDs
Investments allocated almost entirely to large cap stocks (such as funds that track the S&P 500)
Investments in individual stocks from brands that they happen to like (based on the product, not the investment viability)
It’s understandable that people turn to these approaches because they’re the easiest to navigate for most non-professional investors. While not “messing up” is certainly a good thing, it isn’t a thoughtfully crafted investment strategy tailored to your needs and designed to help you achieve your goals.
By working with a trained financial advisor, you’ll reap many benefits beyond what you could do on your own. These include:
A detailed financial plan focused on where you want to get to and how to get there
Access to a broad roster of investments on a platform where fund companies have to compete (not a captive platform using their own products)
Visibility into how your portfolio is allocated (different fund types), for each account and also on a consolidated basis
A thorough understanding of what you own, and why you own it (how it advances your financial goals)
A partnership with a real human being with professional investment experience who will help you navigate changes to your own life circumstances or changes in the market
That’s why it’s important not to weigh the cost of working with a professional against what you’re doing now. Instead, think about reframing your perspective. Working with an advisor can (and should) be about doing things differently in a disciplined manner, not a way to outsource what you’re currently doing.
To learn more about how the value of working with an advisor, contact Paceline today for a free, no obligation portfolio review.
This blog was written by Jeremy Bohne, Principal & Founder of Paceline Wealth Management. Paceline is a fee-only investment advisor serving clients in the Boston area, and on a remote basis throughout the country. Paceline specializes in helping tech and biotech executives, physicians, and those seeking financial planning services.