So let’s get real here.  You are reading this blog on a Financial Advisors website. So obviously I vote for a Financial Advisor.   But it might surprise you that there are some people that I tell they would be better off self-managing for a period of time.  Before I address the question, let’s define a few different title’s that are often thrown around interchangeably and yet they are a world apart.  Here are some of the most common:

#1  Investment Manager

In all honesty most people think that Financial Advisors are investment managers.  Many times when I meet with people about my Financial Advisory Services the conversation goes something like this:  “So if I give you my money to manage are you going to be watching the money every day and telling me when I should get out of one stock and get into another”?  They tend to be shocked when I say, “NO, that’s not what I do”.  How could I be watching your money every day that closely if I’m meeting with clients such as yourself 3 or 4 times a day.  I explain they are actually describing a money manager and very few effective money managers are sitting face to face with their clients.

#2  Stock Broker

There are times that someone is looking for someone to simply assist them in buying and selling of shares of stocks or bonds that they have already decided to buy or sell.  A stock broker or stock brokerage firm is usually the best equipped to do this.  They may or may not give some stock advice but more times then not they are simply reacting to the instructions of their clients.

#3  Investment Company

The investment company is the actual company that is investing the money in their investment products.  This is most commonly a large Mutual Fund Company.  They may operate as both the Investment Company and the Investment Manager.  But often these are different entities where the Investment Company creates the investments that the Investment Manager recommends.

#4  Insurance Agent

Many people consider their insurance agent they work with as their Financial advisor.  And it is possible that some do actually operate in that capacity. But commonly they work by commission in selling insurance products as their primary source of business and often do not operate under the Fiduciary standard.

If you are trying to decide whether working with a Financial Advisor is in your best interest, it may be helpful to have a better understanding of what a Financial Advisor is and what they do.

Financial Advisor Defined:

A Financial advisor is generally securities licensed as a Registered Investment Advisor or a Investment Advisor Representative. They are held to a fiduciary standard in all advice that they provide.  As a financial advisor they are likely to advise on which “Investment Managers” have the greatest potential to achieve their client’s financial goals.  It is possible that they only work for one Investment Management Firm but commonly have access to numerous firms.  The way I explain to prospective clients during the first conversation I mentioned earlier is, “I’m not going to manage your money, I’m going to give advice and manage your money managers”.  This might mean that I advise a change in managers if they aren’t meeting the client’s expectations.

Many financial advisor are licensed to provide advice and assist in obtaining Insurance products that fit into the overall best interest of their clients.  This could include things such as annuities for investments, life insurance for legacy protection, and Long-Term Care strategies to protect your living legacy.

A Financial Advisor who is operating in the function of a Fiduciary is likely to provide many added value services that assist their clients to achieve their needs, dreams, and goals in retirement.  These may be services such as:

Social Security Planning /  Required Minimum Distribution Planning  /  Portfolio Risk Analysis   / Insurance(Protection) Analysis  / Retirement Income Planning  /  Estate Planning Coordination  / and many others….

A quality Financial Advisor takes a holistic approach to the financial needs of their clients to assist them in creating a plan based on what is in the client’s best interest.  The financial advisor generally is paid an annual fee based on value of the funds invested through the Financial Advisor’s services.

So when should you work with a Financial Advisor?  Ask yourself the following questions.  If you find yourself answering yes to one or more then you may want to consider working with a financial advisor?

#1  Would I like to utilize risk managed strategies that have the potential to lessen my chances of experiencing catastrophic losses?

#2  Would I like to have active growth management to increase my potential to maximize my growth by having funds reallocated based on where the greatest momentum in the market is occurring?

#3  Would I like a holistic process that is designed to take all of the pieces of my financial puzzle and put them together in a cohesive and efficient way to achieve my need, goals and dreams in retirement?

#4  Would I like someone to assist in planning not only my investment strategies but also my retirement income and ultimately my financial legacy?

#5  Am I willing to pay for the services and strategies that a Financial Advisor can provide through my investment accounts?

#6  Am I concerned about self-managing my investment and retirement portfolio as I get older?

#7  Am I concerned about my spouse being able to self-manage our investment and retirement portfolio should something happen to me?

If you answered yes to one or more of these questions, then it probably makes sense to contact a financial advisor to have a discussion if their services are a good fit for you(You really should talk to more then 1 since all Financial advisor operate differently within the scope of their practice).

So, when are you better off Self-Managing?

I often tell the passive investor who only invests in NO-Load indexed mutual funds or ETF’s with a growth only mindset, and have no interest in Risk Management or a holistic approach to financial planning that they are better off to buy and hold those funds on their own until their mindset changes to more of a defensive mindset or if they decide it is time to take advantage of the full range of services a Financial Advisor can provide. 

Does it have to be an all or nothing approach (meaning 100% with a Financial  Advisor or 100% Self-Managed)?

Some advisors take an all or nothing approach.  Meaning that they insist the client move all their assets to the advisor or they won’t take any of them.  And in some instances, this is certainly advisable.  But for many clients it’s neither realistic based on what they are already invested in or not desirable due to the enjoyment they receive from self-managing a portion of their assets.  It may make sense to partner with an advisor with funds they desire risk management on, they may want to partner with funds that they are planning their retirement income on, or they may want to partner with an advisor who can assist them on the many planning services outlined above.  But they still may have a portion of their portfolio they wish to self-manage for low-cost either because it’s in their best interest to do so or they have the desire to do so.  A combination of working with a financial advisor and self-managing is often the best option for many people.

If reading the questions above and answering yes to one or more has made you question whether you should consult with a Financial Advisor, I volunteer to be one of the advisors you speak with.  There are many good advisors around, but in all honesty I’m my personal favorite -LOL.  Seriously though, I do believe my Four Cornerstone Investment and Retirement Process is quite unique and would be worth your time to spend an hour to an hour and a half in my Four Cornerstone Introductory meeting.  This meeting has no cost or obligation and will go into greater detail regarding many of the issues raised in today’s blog.

Please give us a call at (865)288-7685 to schedule an appointment or simply go back to my home page on my website at www.stiversfinancial.com and click on the “Schedule an Appointment” button and it will give you access to my calendar to schedule an appointment at your convenience.

If you are considering whether you need an advisor or if the advisor you have is right for you, come visit my blog next week where I will discuss, “What should I look for when choosing a Financial Advisor”?

Have a blessed Day!

Brian