By: Nicholas W. Stuller
Do you know of anyone that has never been to any medical doctor because they simply do not believe they have any value? Have you heard of people that have shunned electricians, plumbers or even structural engineers because they were handy and believe such work can always be done by self-study? Have you encountered family that believe all attorneys overcharge and serve no real purpose?
Some of these beliefs are of course silly, and in some cases downright dangerous, if not life-threatening. What many consumers and investors are unaware of is that if you have such disbelief about financial advisors, you too hold a view that is not rooted in reality nor pragmatic truth.
The reality is that financial advisors help investors and consumers and very large, trusted and in some cases, competing household-known firms including Vanguard, Morningstar, FinancialEngines with AON/Hewitt and others have done significant independent study to prove it out. The punchline is if you are an investor, the average improvement to your portfolio will be about three percent per year every year on average. If you are a consumer (no investments), a financial planner can save you thousands of dollars per year.
However, I have to confess I have two conflicts of interest. First, I wrote a book on this subject and of course appreciate new sales. Second, and more important to me is if you the investor or consumer use my new companies’ website to find an advisor. If you worry about using an advisor because of a conflict of interest, I have a secret to share: every financial advisor has some form of conflict of interest. This is because of another well-kept secret: every human being on the planet has some form of conflict of interest. So yes, I have two conflicts in writing this article. And yes, every advisor you interview has some kind of conflict. The question you need to ask your new potential advisor is what is your conflict, and then determine if it is material or not to you.
So why does everyone need a financial advisor? Three words: complexity, interest, and emotion. First, anything to do with wealth management, investing, financial planning or whatever term that is applied to whatever need is highly complex. It is literally impossible to learn all the ins and outs of personal finance yourself. Can you imagine if C. Everett Koop, the former U.S. Surgeon General who later had a competitor to WebMD, the online medical resource say the following words: “Now that you can research health issues online, there is no need to go to that pesky doctor!” Of course not.
As it relates to interest, the vast majority of people find financial topics completely uninteresting. And what do we as humans do when we encounter a topic we find uninteresting? We do nothing. And doing nothing can harm us greatly, the easy example is life insurance. 30% of American families don’t have life insurance, which is financial Russian roulette to say the least.
Finally, emotion. Humans are emotional, and quite so with their money. We buy unnecessary stuff impulsively, we sell our stocks in rough times impulsively, and we act like the herd despite Warren Buffet advising us of the opposite, but to be fair, only for 40 years now. Sarcasm aside, having a paid, third party person helping us against our own worst intentions is incredibly helpful.
There are all types of advisors for all types of consumers and investors. If you need just a second opinion or don’t have one penny in stocks, or need to delegate management of your fortune, whatever your need might be, it can, and should be, addressed by a financial advisor that is trustworthy and competent.
Nicholas W. Stuller is the Founder and CEO of MyPerfectFinancialAdvisor.com, a 30-year veteran of the financial services industry and author of THE TRUTH SHALL SET YOUR WALLET FREE: Secrets to Finding the Perfect Financial Advisor, published in 2018 by Post Hill Press.