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  • Writer's pictureSteve Coker, CFP

Do I Really Need an Advisor?

The truth about managing your money is that you can do it yourself. I have painted my own house, poured my own concrete, and fixed my own cars. Planning for your financial future is similar. Given enough time and effort you can learn, plan, and invest for yourself.

But as I survey my own ‘do it yourself’ jobs, I realize that I often don’t quite have the time or energy to do the job well; a professional could do it much better. I have begun to ask myself: “should I do this myself?” When it comes to managing your hard earned money, it pays to hire a professional to do it right.

3% higher return

In fact, based on recent study by Vanguard, hiring a professional can add as much as 3% to the annual returns of the typical investor. Why would Vanguard, the leader in passive investing, publish a study showing that the average investor could benefit from advice? Vanguard’s study considered seven best practices of wealth management, which, properly implemented, increase investor returns compared to the typical investor. For your consideration here, I have summarized these seven into three of the most critical steps for investing.

Develop a plan

A good advisor will help you develop a financial plan. “Effective investing start with you” means that the most important step in developing an effective investing strategy starts with understanding yourself. What are your goals? How do you feel about risk? Unfortunately, investing of often much more complex than ‘make as much as you possibly can’. Investing is about finding the right mix of investments with the right balance between risk and return.

Stay the course

Next, a good advisor will help you stay the course. Once you’ve developed a plan, stick to it. Investing can be counterintuitive at times. As Warren Buffet says, “be careful when others are greedy and greedy when others are careful”. It is often tempting to follow the crowds – whether it is chasing returns or running scared. No other factor can destroy results faster than emotional investment decisions, especially during crisis moments. An effective plan helps you chart your own course. A good advisor gives you the confidence to stick to it.

Be tax aware

Finally, a good advisor will help you be more tax efficient with your investing. Investing is about more than simply picking stocks. One of the most effective ways to keep more money in your pocket is to give less to Uncle Sam. Advisors help you navigate the myriad of tax laws that help and hurt your returns. Deferred tax strategies, drawdown strategies, capital gains tax laws, and other tax strategies can make a huge impact when implemented effectively.

Make it happen

Nowadays I hire professionals to do most of the work around the house. I can do the work if I have to, but with the right professional I can trust that the job is in the hands of someone who knows the ins and outs of the work and has far more experience, making me feel much more assured of a positive result. If you have been a ‘do it yourself’ investor, consider the benefits of hiring an advisor. Over time the right advisor can make a huge difference.


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