Investment returns were a of great concern for many in 2022. It was a challenging year to be invested in the stock market. The major indices all had their worst performance since 2008. Though 2023 has generally been been better, so far, the market still feels turbulent and many investors are nervous.
For those investing for the long term I find it advantageous to keep an eye on your accounts but to not spend too much time focusing on gains or, most recently, losses that may have occurred. The stock market is intended for long term investing and focusing on the short term can be very emotionally draining.
My Take on Investment Advice
You may have noticed that I don’t devote much space in my writing to market updates. One reason is that there are no shortage of other places to get this information. Individuals with credentials more robust than mine can be found online or on TV, at any time of the day or night, providing analysis, reflections, and predictions.
Investing is an important part of planning for your financial future. But, it is not my firm’s primary focus. I am qualified and registered to provide investment advice to my clients, and I do so. However, a knowledgeable financial advisor can provide assistance in so many more areas of planning. We can help with tax coordination, account selection, employee benefits, insurance, and many other areas.
Justifying Advisor Value
Many advisory firms default to using investment returns as the selling point for promoting their services. This is because it is an easy service to provide for a low cost, on a large scale. Also, because it can provide very concrete numbers for firms to quote when “proving their value” to their clients. Ultimately, however, my experience in the industry has shown me that most investment advisors follow similar processes, have similar resources, and produce similar results. This tells me that, for the average investor, investment performance should not be the primary criteria used to select or evaluate a financial planner.
The advisory industry dates back to a time when executing stock trades was costly and involved. Persons who wished to invest in the stock market had to do so through a stock broker. Thus, the link between investing and financial advice was born.
In 2023, however, the industry has grown well beyond brokers and stock tips. Financial planners are individuals who are able to assist with cash flow, retirement distributions, tax planning, estate planning, and risk management (insurance) in addition to providing individually appropriate investment advice.
The Challenge of Beating the Market
Today, individuals have access to make their own trades online. Still, the tradition of attracting clients by appealing to their desire to increase their investment returns continues. Yet, It is important to recognize how challenging it is to “beat the market.” Most fund managers are unable to do so year-over-year. If managers with extensive staff, made of up Chartered Financial Analysts (CFAs), cannot regularly beat the market, then how do we expect a specific planner or firm of planners to do so?
Investments are Important
In no way am I advocating for individuals to ignore their investments or categorically avoid the stock market. It is crucial to be aware of your accounts and investments. Rather, my focus is on understanding what money individuals have, what their goals are, and the best way to manage that money in light of those goals.
Investment advice is technically saying something to the effect of “put your money in this account, invest it in these securities.” This is a very important service that helps many. But, more commonly, I find the questions people ask and the uncertainty they feel are related to bigger topics than simply picking an investment.
What is your Objective in Hiring an Advisor?
In uncertain financial times it is common for investors to feel nervous. Nobody likes to see their portfolio drop in value. But this is exactly the time when it is most important to identify your objectives both in investing and employing a financial professional.
- Are you seeking assistance with greater financial issues such as maximizing profits after taxes, planning for your financial future, and/or risk management?
- Are you simply seeking investment advice?
- Do you need or want someone who will completely manage your investments including rebalancing, tax harvesting, etc.? Or are you just looking for someone to select a few investments from your 401(k) fund lineup?
Finding an Appropriate Advisor or Service
Depending upon your answers to the above questions, there are many different individuals, companies, and service models available. A person seeking advice on where to invest a relatively small sum of money may decide that using a robo-advisor is the most affordable option. Someone with a large portfolio and complex needs may be more suited to a registered investment advisory service that offers ongoing monitoring and support.
At Maura Madden Financial Planning I offer hourly services that are most appropriate for those who
- Have a one time situation or question that they would like assistance with.
- Want a financial plan to determine if they are on financial path that works for them, with or without ongoing support and check ins charged on an hourly basis.
- Are comfortable placing their own transactions (with or without handholding).
- Have the cash flow to afford planning but have been turned away by firms requiring minimum investible assets.
If that sounds like you, visit my services page and schedule a free into call to learn if we may be a good fit.
Selecting an advisor can be a tricky process and there are many factors to consider. Experience, cost, credentials, personality, services offered and areas of specialty are among the elements to explore before choosing a financial professional. I caution everyone to beware of using investment returns as a sole means of picking an advisor.