You are probably familiar with the role of a financial advisor: a trained professional who can work with you to create a long-term investment plan based on your specific goals and risk tolerance. You may already know that the best advisors take a holistic view of your wealth, considering the interrelationship of different investments rather than looking at your dollars in this silo or that.
But you may be less familiar with some of the other benefits of working with an advisor, those finer points that stretch far beyond the foundational function of creating a plan. Our advisors shared with us some of the ways that they work with clients day to day, long after the investment plan is up and running:
Interpret signals for you
The market is continuously adjusting to the signals of new information — a higher job creation number, a lower profit margin, an uptick in oil inventory. An advisor can help identify the important variables and translate the implications at any given moment. In turn, they can use these most relevant points to make adjustments to your long-term plan. An advisor can use the daily information coming from markets to make tactical adjustments to your investments. Most important, they’re here to help you interpret these market signals, so you’ll never have to go it alone.
Keep emotions at bay
Most investors approach the markets with a mixture of fear and extravagant hope. Neither is likely to lead to good investment choices; indeed, opportunity is typically created by exploiting anxiety and greed in other investors. As PUB Chief Investment Officer John S. Traynor put it in a recent piece: “We must acknowledge, embrace and control emotions, understanding that in the end facts will prove out.”
Help you to get and stay invested, knowing the context of market cycles
Investors who are patient and understand the cyclical nature of financial markets can reap the benefits of long-term market expansion. Investors who shy away from investing due to fear of a drawdown could be missing out on market gains. Ultimately, one of the most important elements of investing is just time in the markets. An advisor can help you to stay the course, providing the context of natural market cycles and giving you the comfort to get and stay invested.
Know what you own
Investors need to understand what investments they own and examine if different investments are exposed to the same underlying securities or industries. An advisor can help. An advisor can guide you to take appropriate actions to mitigate risk and protect yourself from amplified losses. By doing periodic reviews of portfolio holdings and rebalancing your investments when needed, an advisor can ensure that your assets are diversified and align with your investment plan.
Boost your chances of success
There’s considerable academic and industry research to suggest that working with an advisor can increase your likelihood of a good financial outcome. You might assume this is mainly due to investment “alpha” — that the advisor will direct you toward investments that outperform the market or some appointed benchmark. But the possibility of investment alpha is only one driver, and probably not the dominant one, behind better outcomes. The more salient point is that an advisor can offer you objective and informed guidance through a complex and emotional experience.