Is the Time Right to Get Some Help?

The NFL draft, will be the first pseudo sporting event in months, is next week so I'm thinking about football!

After a lifetime of watching football, I now realize that quarterback coaches and financial advisors are very similar. Let me explain! Every quarterback has at least two opponents:

1) Opposing defense that wants to rip his head off, and

2) Himself.

By himself, I’m referring to the mistakes that are made in the heat of the game. Throwing off the wrong foot, holding on to the ball too long, or, our favorite here in Chicago, throwing to players wearing the other team’s uniform.

Anyway, a good coach protects his quarterback from unforced errors, which brings me to the quarterback of your future. YOU!

As the quarterback of your future, you face a ferocious defense (the financial markets) which are very difficult to navigate - certainly during the Covid Pandemic. As if that wasn’t challenging enough, you also have the psychological side of the game.

Many individual investors simply do not have the time, patience, knowledge, or persistence to deal effectively with their investments over the long term. Further, there are common mistakes that they make that a professional advisor can help to overcome:

· Making ad hoc, fear-based revisions at the first sign of market weakness;

· Emphasizing individual securities rather than the overall portfolio;

· Failing to re-evaluate the financial situation at least annually and then revise plans;

· Getting caught up in market hype and losing investment focus;

· Chasing investment fads.

Sounds about right. But is there a way to quantify the help a good advisor provides?

According to The Vanguard Group, (which is all about low fees) “Advisors can add up to 3 percent per year to client returns by helping them allocate assets, rebalance appropriately, and stick with the program when times are tough which they may be over the next 10 years.”

As we have seen over the last 2 months – times have changed. Many outlooks suggest lower returns going forward, and we are entering a time where mistakes will cost more than ever before.

Managing (minimizing) drawdown and avoiding large losses will be vital, protecting principal even more so.

The elephant in the room is: Fees. It’s true, there are fees. Nobody disputes that advisors earn some money for their efforts.

But what’s important to keep in mind is that there are fees in all your investment accounts. Many 401(k)s have high fees. Insurance products have fees, as does nearly every mutual fund. Most people don’t realize it because the fees are generally hard to decipher. What you don’t see/know, will hurt you.

To me, the real questions are:

If you’re going to pay somebody (which you are), what are you going to get for it? Will they help you devise a plan? Are you going to get sound investment, retirement and tax advice or are you going to get unnecessary and arbitrary fees which are hard to see?

Somebody is going to get paid for something; you might as well get something tangible in return.