A Quiet Fortune: Should you use a financial adviser?
Money markets, ETFs, traditional IRAs … blah, blah … PE ratios … blah blah, blah … Roth IRAs, fund companies, SEPs, selling short …
Have your eyes glazed over yet? Did your mind turn off? Are you thinking about how beautiful it is outside or how many other things you need to be doing right now?
If that’s the case, I’ll make a prediction: You may be exactly the right person to use a financial adviser who can help turn those “blahs” into a solid future.
I had planned to write about some investment terms in this column, but I’m going to put that off until later. That’s because, even if we hate the idea of mastering financial minutiae, every single one of us absolutely must begin to build financial security. It’s up to us these days. Back in the 1980s, secure retirement plans began to disappear, and now most of us are on our own.
Many investors have decided to go it alone. James Langford of thestreet.com says: “Passive investment funds posted net inflows of $504 billion last year, while a net $304 billion was removed from actively managed funds.” Many people are investing on their own in index funds because they will save money in fees.
But — and it’s a giant but — if you aren’t interested in this stuff or don’t feel like you know enough, that does not mean you can just forget about it. Your future matters, and you’ll be sincerely happy if you begin to save and invest today. Not next year. Not 10 years from now. Imagine: One person might start retirement with a balance of $47,000, a national average. Another person making the same income who starts investing early could accumulate $470,000 or more. Which one sounds better?
I asked Amy Fetterhoff, an Edward Jones financial adviser in Glenwood Springs, why someone might want or need the help of a professional. She gave me four important reasons.
First, a financial adviser can help us “understand how much we should be putting away to be able to meet our goals in retirement.” Even though there’s a retirement calculator on almost every financial website out there, just talking with a human can make a big difference. An adviser can help us set a goal and then show us how to get there. Those meetings are usually free. (Another kind of adviser, fee-only, does charge for consultation meetings but doesn’t take a fee when you begin to invest.)
Second, a financial adviser will review your goals and progress at least yearly and suggest any changes you might want to make to keep moving toward those goals. You should be willing to ask questions about things you don’t understand, but you won’t have to completely master all the nuances of investing or stay current on market trends and world developments. That’s your adviser’s responsibility.
Third, it’s during retirement that an adviser has the hardest job: helping us make sure that our nest eggs will provide a decent income, particularly since people are living many more years on average than we used to. That’s when an adviser’s skills become crucial.
Finally (and this is the most important reason of all), an adviser’s job is often to manage emotions. “It’s investor behavior,” says Fetterhoff, “not the stock market, that causes problems. Most people panic and want to sell in a down market, but want to buy more when the market is soaring and stocks are high. The barrage of media information can encourage fear or unrealistic expectations.”
Advisers help smooth out those emotions and can keep us on track. Fetterhoff cites an independent 20-year study by DALBAR that shows investors who “bought and held” ended up with almost twice as much money as people who bought and sold.
Go it alone if you choose to. The fees for that could be lower. But a good financial adviser can help you in multiple ways, so don’t feel hesitant about using one. The important thing, no matter how much you have to invest today, is to start today.
Terrie Drake is author of the book “A Quiet Fortune” and a retired teacher and librarian. She and her husband have lived in Glenwood Springs since 1974. She is not a financial adviser; consult a competent professional for your personal financial solutions. She can be reached at email@example.com.
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