Knowing how to manage their money and increase their assets even in rocky financial times remains a task that many Americans, at whatever level, simply aren’t qualified to tackle on their own. For most, there’s more to investing than just a 401(k) in order to meet individual goals and ensure a secure retirement.
“There are numerous studies comparing do-it-yourself investors to those who work with financial advisors,” says Tim Hanser, a wealth advisor and managing director with Clayton Financial Group. “Even when you factor in fees paid to a financial advisor, investors who work with professionals come out ahead.”
Hanser is fascinated by the academic approach to investing, poring over journals and using that information to help inform his recommendations to clients. “Individual investors eventually make mistakes, when hunches and emotion override discipline. Those mistakes usually prove costly,” he says.
In other words, headlines predicting a 2020 recession are enough to make most people nervous, and that emotional reaction affects their decisions. Professional financial advisors, however, use their experience, expertise and knowledge of the field to keep clients on track. And that’s when they become many investors’ best financial friends.
“This is one industry where we still spend time really talking to our clients,” says Kelly Waller, a certified financial planner with Wells Fargo Advisors in Clayton. “Anytime someone is concerned or uncomfortable, we’re just a phone call away. We listen, and then we make sure we help position people at the right balance of risk and return.”
Both Waller’s and Hanser’s approach, which they refer to as “holistic financial planning,” involves more than just investing. “We will work with the client’s accountant on tax matters, if needed, or with their attorney on estate matters,” Waller explains. “We consider the entire financial picture – short-, intermediate- and long-term – and then we make informed recommendations.”
Given that working in concert with a professional benefits most people, finding the best fit for a long-term client/advisor relationship can seem daunting. “You’ve got to really trust your financial advisor and believe that they have your best interests in mind,” Hanser says.
Investors need to understand how their advisors are paid. Hanser recommends working with an advisor who charges a set fee instead of receiving a commission for the sale of a specific fund or type of investment. “Taking commission out of the equation helps ensure the advisor is making the best decision for the client, not for himself or herself,” he says.
Aside from understanding and accepting fee structures, Waller suggests asking friends for referrals. Much of her business is referral-based, and she points out that friends or family members who have a long track record of positive interactions with a financial advisor are helpful references. Beyond taking a friend’s recommendation on faith alone, however, Waller notes that individuals should also check a potential advisor’s credentials and experience.
“I’m a certified financial planner, and my colleagues and I have had extra training in order to gain the CFP credential,” Waller says. In addition, an introductory meeting will allow a chance to ask questions about the advisor’s experience. “A good advisor will be able to offer alternatives that the investor might not have originally thought of and explain both the pros and cons of each option.”
As the end of the year approaches, Waller recommends checking in with your financial advisor to report any significant changes in income, benefits and outlook for 2020. “Looking at changes in the past year and anticipated changes, we can adapt and adjust as needed,” she says.
Waller agrees with Hanser that emotion derails rationality, and she reiterates the importance of ongoing communication to obtain the best results. “Do your homework,” she says. “Create a plan. Have conversations and make decisions without overreacting. We can always make changes. Communication is the key.”
Clayton Financial Group, 165 N. Meramec Ave., Suite 130, St. Louis, 314-446-3250, claytonfinancialgroup.com
Wells Fargo Advisors, 8112 Maryland Ave., Suite 500, Clayton, 314-726-5050, wellsfargoadvisors.com