Children with verbal developmental delays need speech therapists so they can improve their communication skills. Athletes need coaches to enhance their strategies in their chosen sport. Professional singers reached their success not on talent alone, but also with mentoring from voice instructors. One doesn’t become an established baker overnight, sometimes he or she needs training from world-renowned chefs.
In the case of wealth management, there comes a point in one’s life when you will need the expertise of investment advisers.
What Is an Investment Adviser?
An investment adviser is basically a person who provides his knowledge on money and investing for a fee. Based on his technical know-how, you gather points from his personal and client experience on how you could make important decisions to save and grow your money, protect your income, ensure you leave your family enough funds in case of your untimely demise, and reach other financial goals.
An investment adviser guides you in making important investment decisions by studying your current situation. This is where an Investment Policy Statement comes into the picture. You first talk about your monetary goals, risk tolerance, and current financial standing before you strategize on how you can grow your cash, plan for your retirement, save for future medical expenses, etc. Remember though that they may have all the expertise in wealth management but they should never make the decisions for you.
What are the pros and cons of hiring an investment adviser? Let’s take a closer look.
3 Pros of Hiring an Investment Adviser
Here are 3 pros of hiring an investment adviser.
1. They Eat, Breathe, and Live the Investment Market (At Least We’d Hope So)
Good investment advisers’ ritual in the morning is to study the market conditions. They know which sectors in the stock market is outperforming and underperforming (or at least they should). If the oil prices have gone up or down significantly, they know why. If the market is volatile, all the more reason to know why.
More often than not, they are aware of which life insurance companies in the country have the best performances in terms of interest rates, annual premiums paid by clients, and customer trust.
They are quick to learn which areas in your town have the best places to buy your dream home at a good price. They know which countries in the world are best to invest in at the present time. They are simply ahead of the ordinary person pertaining to the movements of stocks, bonds and other money market instruments.
2. Investment Advisers Attend Investing Seminars at Least Once a Year
There are plenty of investment conferences every year that financial analysts, life insurance agents, financial planners, real estate agents, and the like attend that are either voluntary or compulsory in their respective professions. Many investment advisers who are licensed and registered in their respective fields of expertise are required to attend several conferences to keep up with the latest updates and challenges. Once you hire an investment adviser, you should expect expert advice that should meet your financial needs and goals.
3. Your Own Convenience
You spend your productive days bringing home the bacon and setting aside some for your investment plans. Do you still have the time to meticulously study the market?
People don’t have all the time for that. This is when investment advisers become crucial.
In exchange for fees, they study the market for you. All you gotta do is ensure that you get what you pay for and consistently communicate with your adviser, so he or she will also do his or her job appropriately.
3 Cons of Hiring an Investment Adviser
Here are 3 cons of hiring an investment adviser.
1. Costs
Normally, the fees are what keep most people away from considering the idea of hiring a financial adviser. You might not be comfortable with the idea that your investment adviser is earning from your investments. When you are not meticulous enough, they might be charging you fees that are over the top. The annual percentage of your fees might even be higher than the actual rate of return your investment portfolio makes.
TIP: Encourage transparency. There’s no free lunch on Wall Street; nothing is free in this world and you need to live with that fact. The key here is to know exactly how much your adviser is earning. Is it based on commission, a professional fee only, or both? Do not be afraid to ask, but don’t appear unprofessional. They are guided by policies that require them to be as transparent as possible to their clients.
2. Different Fields, Different Advice
Let’s say you are not married, and simply want to invest as soon as possible and just let the future take its course. Your parents have enough money to support themselves. You are on your own, so to speak. In this case, you have no kids and spouse to worry about in the event of your untimely death.
You meet your potential investment adviser who is referred to you by a friend. You have decided to save and grow your hard-earned money through investing in the stock market and begin to ask which vehicles are best for you. Because he is a life insurance agent of a large insurance firm, he suggests that you buy a life insurance policy for income protection. You have no idea that he did so because he is running after his quota for that particular product.
A life insurance policy for income protection, typically a “traditional” life insurance policy, is one in which your beneficiaries will enjoy the proceeds of the policy after you pass away. What actually fits you is a variable unit-linked policy where your premiums are invested in stocks, bonds, and other assets. However, in your situation, you don’t need income protection because you are single. What you need is a vehicle in which your money grows fast and you can use it while you are alive because for the moment you are not worried about leaving anyone with nothing behind in the event of your untimely death.
3. Investment Advisers May Have Other Incentives
There are financial advisers who are only interested in selling and looking out for their own personal gain. They are not even aware of what’s truly going on in the financial markets and how these market events affect you and your investment portfolio.
A true financial adviser is not all about selling. He studies your situation, aligns it with your current needs, considers current market conditions, and provides you with options that illustrate the positive and negative impacts that come with decision-making.
TIP: If you decide to get a financial adviser, choose wisely. Ask yourself, what are his fields of expertise? Whether you are an individual or a business, your interests must be of utmost importance.
A Group of Financial Professionals
There are financial planning firms today that are composed of all the professionals that you may need who are willing to sit down with you all together to help you protect and grow your money. They have insurance agents, tax preparers, accountants, bookkeepers, and real estate experts who brainstorm together to give you the best advice that you need. It might cost more and is not suitable to everyone’s situation, but having them all together to study what you have and where you want to go is a great way to ensure that all the aspects of your money life are well-covered. However, if you’re like most people and have limited assets (think less than one million dollars), you don’t need a group of personal experts. A simple financial adviser that works on a commission basis or based on portfolio performance incentive could point you in the right direction and help you understand what you need financially and how to get there.
Final Thoughts
Whether you hire an investment adviser or not, be involved in your journey to wealth management. It is not enough to hire someone and let him or her do all the work without your involvement. It is your hard earned money and you have every right to know what’s going on, or they will rip you off without you ever knowing.
What is the key takeaway here? Educate yourself and have at least basic investing knowledge – whether or not you hire a financial adviser. Since you have read this post all the way, I’d like to say that you have come to the right place. You now have an edge over the rest and should be more confident when meeting financial advisers.