Congratulations on finding this site. If you found us here at Wiser Adviser that means one of only two things:
- You realize there might be some importance to adding a financial professional to your life (but you are not quite sure the answer is 'Yes' or not quite sure how to do so most effectively).
- Or you already have a financial professional working for you (but you are not sure you did so most effectively when you hired him or her).
Today, I would like to add some discussion to why it is a good idea to do so and later, we can look at how to do so most effectively.
There are many types of Financial Professionals ranging from consultants to counselors to advisors to planners. What they should provide you (The Boss) is simply the ability to make smart decisions about your money. How do we measure if you are making smart decisions ? luckily, that is simple to understand (though harder to gauge).
- Do they save you more money than they cost?
- Do they assist you in managing risk better than you were doing before?
- Do they facilitate your understanding of financial concepts and strategies beyond where you are presently?
- Are you confident your Advisor understands your situation and that you understand and trust him or her.
If the answer to ALL of these questions is "yes", then congratulations! If the answer is, "no" its time to find one who will. If the answer is, 'I don't have an advisor' ? then these are the things you are looking for in an advisor.
Unfortunately, today it is harder than ever before to actually manage complex, or even fairly simple, financial concepts. The reason is simply, The Internet (which ? wink wink ? is how you found this article). There is so much advice or opinion or strategy out there in the public domain it is virtually impossible to know which is most accurate. And in that situation, the average American looks for something that passes 'the common-sense test'.
In the world of finances, forget about common sense. If common sense prevailed, the IRS wouldn't allow you to charge yourself to park your car in your own driveway at home & but it does (if you qualify, of course). There are thousands of informational purveyors who prey on Americans by offering 'common sense' solutions to oft times complex financial issues. And since the common result is investors underperforming the market, carrying excessive debt, and paying way too much in the process & common sense has produced common results (none of them commonly good).
Magazines like Money and Kiplinger consistently give advice in a vacuum and advice that is self serving. They want to sell advertising first and subscriptions to increase their advertising rates second. As a result, they are forced to Keep It Simple Stupid so as not confuse a reader and thus discourage that reader from reading further. A financial professional can give you the same information, but also the ability to ASK your questions and to get an answer. To go deeper and to have a more complete realization of the esoteric but often compelling underpinnings of financial services and products. Here are a couple of, dare I say evil, concepts that are often wrong about financial products.
- No load mutual funds are cheap.
- You need 10 times your pay in insurance.
- Always buy Term, never anything else.
- Managed funds rarely outperform indexes.
These are all simple, straightforward, and rarely true. If you could do financial planning on a napkin, we would all be gazzillionaires (and I would be out of a job & yikes). Luckily, there will always be smart people who benefit from my services, and the services of legions of other good advisors out there.
So, happy hunting for an advisor - if you are one of those smart people.