Dallas County Living Well Magazine November/December 2016 | Page 44

The True Value
of a Financial Advisor
By Gary Brancaleone CFP®, CRPC®

F

inancial advisors don’t work for free, but their true
value can far exceed the fees they charge when investors select them wisely. An advisor’s experience
and expertise may actually help you make more
money in the long run compared to self-managing
your portfolio and other aspects of your personal finances.
KEEP YOU ON TRACK THROUGH PERIODS OF
MARKET VOLATILITY
A financial advisor can keep you on track
throughout all market conditions, which is especially important during periods of market volatility. Investing is emotional. Bull markets are exhilarating, while recessions and volatile periods can cause huge
amounts of stress (just think about 2008). Loss is painful, so
it makes sense that during times of market loss, recession,
and other turmoil that an investor’s instinct may be to go to
safety––that is, to sell out of the market and go to cash after
declines have already occurred.
However, selling out of the market during a downtown can
have damaging long-term consequences on your portfolio.
There are transaction costs and broker fees associated with
selling out and buying back in to the market, and both
rounds of costs would have been avoided by holding your
investments. Furthermore: when do you buy back in? If
you sold your investment holdings after the October 2008
crash, it’s likely you weren’t back in the market before February 2009, which means you missed the five best postcrash market days.
The figure below demonstrates how significantly missing
the top market days can affect your long-term gains. The
findings are eye-opening:
Self-managed investors are much more likely than those
who work with a financial advisor to react to emotional,
short-term market volatility, rather than to hold their investments and keep focused on their long-term plan. Those
short-term reactions can have negative longterm effects on your portfolio.
BEING A FINANCIAL ADVISOR IS A FULL-TIME JOB
Financial advisors dramatically reduce your
workload. The investment universe is vast, and the possibilities for your portfolio are practically infinite when you
consider all the combinations of holdings, asset allocations,
and diversification available. It takes a significant amount
of time to research, develop, weigh, and monitor an investment portfolio. That’s why being a financial advisor is a fulltime occupation––it takes that much time and effort to fully

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DALLAS COUNTY Living Well Magazine | NOVEMBER/DECEMBER 2016

understand and stay up to date on the market, monitor it,
and know when it’s appropriate to rebalance the portfolio
or to invest in a new holding.
The requirements for staying on top of your portfolio can
quickly become burdensome if you’re managing it yourself.
Investment success shrinks when you consider the opportunity cost of maintaining a portfolio yourself (lots of time
spent on it) versus having a financial advisor do it consistently for you. This allows you to dedicate your time to that
which matters most in your life.
A FINANCIAL ADVISOR PROVIDES DISCIPLINE
AND EXPERTISE
Financial advisors also provide discipline. Selfmanaged investors risk falling into one of the two discipline extremes––being too disciplined, or not disciplined
enough. Overly disciplined self-managed investors risk
“analysis paralysis,” in which they become concerned
that their portfolio isn’t as good as it could be, research
endlessly and never actually make appropriate changes
to their portfolios. At the other extreme, self-managed investors who lack discipline aren’t likely to monitor their
portfolio or take action to maintain a proper asset allocation and appropriate level of risk for their situation. In
both cases, investors are likely taking undue risks which
can be mitigated with the assistance of a financial advisor, who can help avoid missing key rebalancing and buying opportunities.
In addition to the discipline it takes to navi gate investment
markets, substantial knowledge and expertise is important.
Financial advisors can devote years to becoming properly
trained, earning credentials such as Certified Financial
Planner™ (CFP®) or Chartered Financial Analyst (CFA®).
These designations involve extensive training and testing.
Other financial advisor designations include the Accredited
Investment Fiduciary (AIF®) and the Chartered Retirement
Planning Counselor (CRPC®). By working with a trusted
and credentialed financial advisor, you can reduce your
workload while ensuring that the professional advising you
is qualified to do so.
And don’t forget the big picture. Is anyone serving as the
financial quarterback in your life? Beyond your investment
portfolio, has anyone reviewed your insurance coverage,
estate plan, tax situation, and other important areas of your
personal finances? A lack of objective guidance and
expertise can become time-consuming and lead
to costly mistakes in all of these areas without the discipline of a financial advisor helping you along the way.