By Nicholas W. Stuller
Our world has been changed dramatically over the past two months because of the first pandemic of our modern era. Massive numbers of deaths from the Coronavirus, record unemployment, and home confinement are taking their toll on many levels. The remarkable speed of all these issues occurring has nearly everyone concerned about their finances, so we feel it appropriate to republish that an article on why everyone needs a financial advisor.
Since we published the below piece, a few notable things have happened. First, the market has whipsawed even more driving the need for those with a portfolio to see professional guidance. Second, most states are requiring home based work, so the need for a financial plan to help cope with new and different expenses is skyrocketing. Third, massive layoffs are forcing those without means to make terribly difficult choices, but thankfully Pro-Bono financial planning resources have become available such as the Foundation for Financial Planning’s Coronavirus initiative.
Here is the article, we hope you will seek help during this difficult time:
Recent events reinforce the need for everyone to have a financial advisor. Regardless of how much or how little money you have, it is impossible to feel uncertain in these times. The Coronavirus has been an event that has forced a bear market, record-speed stock market drops, business closures, health scares, kids home from school for extended periods of time and these are only the high-level impacts. A financial advisor is trained to give objective perspective on what to do with your wealth, budget and investments in times like these. If you don’t have an advisor, you should seek one out today.
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, all the truer in todays’ environment of COVID-19. 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.
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 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 said 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 impulsively in rough times such as this week’s record-setting market decline, and we act like the herd despite Warren Buffet advising us of the opposite, but to be fair, he has only been saying this 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 should be addressed by a financial advisor that is trustworthy and competent.
Nicholas W. Stuller is the Founder and CEO of MyPerfectFinancialAdvisor, 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.