By The average American can rattle off five or six very good reasons to work with a financial advisor instead of handling retirement planning and investing independently. Among those reasons are the expertise financial advisors offer and the lack of knowledge among consumers in general. Still, there are less obvious reasons that the average consumer does not consider.
These less obvious reasons are not necessarily so obscure as to be unrecognizable. Rather, they are related to things people simply do not think about. It is like anything else. Experts are considered as such because they are familiar with all the finer points of the topics they specialize in. They think of things that others do not.
Potential Cognitive Decline
This post offers a number of less obvious reasons for working with a financial advisor, beginning with potential cognitive decline. The fact is that all of us are at risk of cognitive decline to some extent. Such decline is a normal part of aging. What happens if an investor reaches a point at which cognitive decline is significant enough to inhibit the ability to properly manage investments?
A smart financial advisor recognizes that possibility and works with clients to arrange for third parties who can take over financial management should cognitive decline become an issue. The designated person can keep in contact with the financial advisor to stay abreast of what’s going on. Should the person’s services ever be necessary, he or she will be up to speed very quickly.
Additional Industry Contacts
A second less obvious reason relates to all the business contacts financial advisors have. For example, you might work with an independent advisor connected with Western International Securities, a large broker-dealer based in Pasadena, California. That advisor will have contacts with other financial services providers capable of helping out where there might be holes. You can never have too many contacts when you are planning for your financial future.
Effective Crisis Management
People who invest without the help of a financial advisor or broker tend to be just fine as long as things are going according to plans. In the middle of a financial crisis though, it is easy to allow panic and irrational thinking to creep in. That is not good for investing.
A financial advisor lives and breathes the ups and downs of the financial markets. Advisors are less likely to be spooked by a crisis, making them the ideal candidates to guide clients through with effective crisis management. This one thing alone ought to be enough motivation to start working with a financial advisor if one is not already doing so.
Accounting for Life Changes
Finally, independent investors often fail to account for life changes as they work to fulfill their financial plans. Unfortunately, how such life changes affect a person’s financial future are not often recognized until some of the damage has already been done. Working with a financial advisor can help to prevent such damage.
As soon as any life change event occurs – marriage, divorce, the birth of a child, etc. – the investor can contact his or her financial advisor for advice. That advisor can then compare the current financial plan to the implications of the life change event to determine whether modifications need to be made or not. And because financial advisors are experts in this area, they can tell very quickly whether plans have to be modified.
It is nice to be able to invest independently if you can. But even the most experienced investors should be working with financial advisors for both obvious and not so obvious reasons.
