The Investment Advice Advantage: Financial Advisors' Daily Digest

by: SA Gil Weinreich

Summary

Investors who know they have succumbed to Johnny-come-lately trend following, to their portfolio's peril, are especially suited to a good financial advisor.

John Lohr suggests dying early as one of the few alternatives in solving the retirement crisis.

Jack Waymire discusses marketing strategies for financial advisors.

Continuing this week's series on the relative merits of employing an advisor, allow me to suggest one potential benefit of doing so: leadership. Advisors like to describe themselves as their clients' CFO or financial quarterback. And indeed, this is often the case for the simple reason that investors, being human beings, tend to follow fads, trends and crazes. The dot-com era was a memorable example: It was so hard to resist jumping in when the newspapers daily recounted the huge surges in share prices week after week and year after year. When the dot-bomb hit in March 2000, many portfolios were shattered.

A true leader educates clients on what are the key principles that should define their financial decision-making: how does one invest, how one can increase his savings rate; spending restraint, etc. The best advisors do this. The worst follow the same trends as Johnny-come-lately investors. I still recall Wall Street Journal articles in the aftermath of the dot-bomb detailing how many brokers made it big promising the moon and stars to all-too-eager clients. For that reason, our education system needs to make greater strides toward financial literacy, and our regulatory system needs to screen out know-nothing stock jocks. Wise investors who value the service need to invest up-front in due diligence to locate an appropriate advisor.

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