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Business // Thinking Smart
David S. Chang

An Adviser Can Improve Returns

When people find out I am a financial adviser, usually the first question I am asked is what I believe the next best investment is or how my performance has been in the past.

Getting a good return on your investment is important, but there are more important reasons to hire a financial adviser.

There is truth to the proverb “Where your treasure is, there your heart will be also.” Financial planning is very personal and relational, which involves an incredible amount of trust.

Here are the real reasons why you should look to hire a financial adviser.

* Good financial advisers will take the time to understand your goals, risk tolerance and values to create a financial plan to meet those goals.

They then will recommend investment products to fit your financial plan, not just try to sell you financial products and have your financial plan fit investment products.

Beating the stock market has very little bearing if you can achieve financial independence.

In fact, research shows that the hottest hedge fund and actively managed mutual fund managers struggle to beat the market!

Being financially disciplined and following a good financial plan is more important than just striving to beat the market.

* Take a big-picture view of your finances.

A good adviser will ask the right questions to help you stay financially proactive.

Some of these questions are hard ones, such as how to take care of aging parents, how to pay for college, what will happen if you lose your job and other questions that you may not be able to ask on your own.

Another set of eyes on your financial situation can keep you focused on the big picture.

* Help you stay disciplined.

A good adviser can help prevent emotions from getting in the way.

This is one of the biggest challenges investors face: letting erratic, short-term movements of the markets create anxiety for them, and then reacting improperly.

Being disciplined also prevents investors from chasing performance and following the herd. Another voice during tough economic conditions and volatile markets can be invaluable.

* Help you manage your investment biases.

Studies show that men and women approach investing very differently. Women tend to be more risk averse than men. Since women tend to live longer, it may be wise to tolerate a little more risk.

A good financial adviser can talk you through your biases to either push or temper your risk tolerance, depending on your situation for long-term financial success. It also is important to identify risks in a portfolio that you may overlook.

Financial advisers can be expensive, but like most things, you get what you pay for.

If you are able to find a good adviser who can provide the above services, his or her value can be very meaningful!

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