Many people like to take a “do-it-yourself” approach to certain things in their lives; after all, there is a certain satisfaction to be had from saving money by doing something yourself when you think you can do it well.
And, that approach often makes sense for doing things like painting the inside of your home, other home-improvement or repair projects. You can take classes at your local hardware store and watch videos online and, within short order, you can tackle a project with your own hands. Sure, it might take you longer than it takes the professionals, but at the end of the day, you have newly painted walls, or new flooring, or a new faucet.
However, when it comes to professional services, including services provided by financial advisors, brokers, attorneys and medical professionals, going it the do-it-yourself route can leave you disappointed at best, or could have disastrous consequences at worst.
You wouldn’t try to perform your own dentistry, and you shouldn’t try to write your own will. Financial advisory services are in that same category.
Industry knowledge and experience
When you choose to work with a registered broker or financial advisor, you’re working with someone who has studied and passed knowledge examinations, and works daily in the financial services industry applying that knowledge to help position clients to achieve their financial goals.
Your financial professional is just that: a professional who knows the ins and outs of various investment products, approaches and strategies. It’s not enough to just have product knowledge though, so your financial professional also has the experience and expertise in the field to stay on top of your investment portfolio during both periods of market upswingsand downturns, so you don’t have to lose sleep over your choices.
Here are some key areas where working with a financial professional adds value:
- Complexity. Financial products can be incredibly complex. You may think you know the differences between mutual funds and annuities, or between mutual funds and ETFs, however these vehicles can be nuanced and the product or fund’s name is not necessarily indicative of its underlying behavior or investment strategy. Your financial professional knows these products well and can help guide you toward products that are suitable for your situation and goals.
- Tax traps. While your financial professional is probably not a tax advisor and will not be able to give you any type of specific tax advice, he/she should be able to give you general information about how your investment vehicles operate from a tax standpoint, and can help you identify potential tax traps with respect to distributions or rollover timing/methods.
- Allocation. Your financial professional will help you identify an appropriate investment asset allocation mix, based on your experience, time horizon and risk tolerance level. Then, he/she can help you implement an investment plan that is right for you.
Choosing the right advisor
When it comes to finding the right financial professional to work with, choose someone who has experience working with clients in similar situations. If you are a business owner, find a professional who works with other business owners for their personal and business investment needs.
Do your homework, and make sure you are comfortable working with a particular financial professional before you sign anything.
When financial markets are choppy, you should look carefully at expenses and cut out any unnecessary services or other costs. However, just as you wouldn’t give yourself a root canal or defend yourself in court, don’t try to make all of your own investments without professional guidance and support either.
To learn more about how S.A.C. Investments works with clients to help them realize their own vision of financial success, contact us today.