In the United States many investors are self-directed, meaning they make all their investment and financial decisions without the assistance of a financial advisor. While many of these investors do acceptably fine, the reality is that they would do much better if they had a “financial coach” to guide them and be there as a second set of eyes on their wealth management.
For professionals in sports, acting, and literature to name a few, those who make a living by performing some skill all have coaches to get better and better. Why has Tiger Woods always employed a golf coach, despite his innate ability? To get better. Why did Ernest Hemingway have an editor reviewing and augmenting his already gifted writing? To get better.
Self-directed investors should employ a licensed financial advisor as their financial coach if they too want to have their financial life perform better for them. In todays’ world, advisors also help investors on an hourly, fee or retainer basis to support those investors who enjoy being involved. Here are three reasons (of many) why having a financial coach will benefit:
- Second Opinion on Technical Issues
There can be significant research necessary to make an informed decision on a financial action. For example, if you are an investor that depends on income and you prefer dividend paying stocks, much research can be required to make the optimal decision. The consistency of the company paying dividends, the overall health of the company, and the effect of inflation on future dividend streams can be just a few of many points to research and having an expert also review your picks can be invaluable. For another example, the pros and cons of a Roth IRA for you personally can be quite complicated. Having the opinion of someone who sets up IRAs frequently can be quite useful and help prevent a misstep.
2. Emotional Distance
Investing and your finances can be quite exciting and very stressful. It can be easy to get caught up in the moment of that hot new investing trend, and either over extend yourself or fall prey to the next Madoff. Having a dispassionate third-party that is also licensed by state or federal regulators can help offset a person’s zeal that might be headed in the wrong way. To whatever degree there are former Madoff or Game Stop investors that ignored their advisors appeal to go the other way, they surely today are regretting ignoring the advice.
3. Unintended Consequence Discovery
In the course of a conversation about that covered call strategy, cannabis ETF or Trust establishment, your coach-advisor may learn something about your situation that is an entirely new action item that could be quite important for your goals, yet surprising to you. You could find out that you have not updated your beneficiaries to account for a new grandchild, learned about a nuanced benefit of ESOPs for your private family business, or learn of an entirely new way to secure digital access to investment accounts. In life, one never can predict where a discussion or train of thought will lead you and the same is true for conversations with a financial professional.
If you believe your skill level to be close to that of a Tiger or a Hemingway, or you are at the other end of the spectrum, being a self-directed investor with a coach will likely yield better results than going completely alone.
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