It’s the curse of bull markets. People think “Investing is easy. Anyone can do it.” Eliminating the middleman. Advisors bring value, often in ways investors don’t realize until they’ve made some mistakes. Your challenge is getting the message through.
Twelve Ways Advisors Add Value
Think about it. Here are some of the unheralded ways you make a difference.
1. Investing is complicated. Will Rogers said something like. “Buy some stock. When it goes up, sell it. If it doesn’t go up, then don’t buy it.”
Human Nature: Some people think the stock market is a one way street.
An advisor: It’s amazing the amount of work it takes to make something look effortless.
How to say: Investing isn’t something you focus on when you feel like it. Investments require attention.
2. People lose interest. They break New Years resolutions. The fall off diets. Their friends invest. They do too. Then their friends have a new interest.
Human nature: People have short attention spans.
An advisor: You are expecting a long term relationship. You will pay attention to their investments even when they lose interest.
How to say: The stock market has historically delivered good returns, but over time. You need to pay attention and stick with it. That’s your profession.
3. Someone needs to drive the bus. People buy insurance. They borrow money. They save. They invest. Someone needs to be concerned how all the pieces fit together.
Human nature: We think of things in silos. You have your gym friends. Your work friends.
An advisor: Starts with the financial planning process to see how all the pieces fit together, working towards a common goal.
How to say: Do you want to devote time to overseeing the different aspects of your finances yourself or do you want to outsource parts of it while maintaining oversight?
4. There are no “do overs.” In golf, there are “mulligans” or bad shots that don’t count.
Human nature: We want a “free pass” to avoid responsibility for our mistakes.
An advisor: Helps the client make a decision with as many facts on the table as possible. Together, they monitor the results.
How to say: Investing is serious business. The older you get, the less time you have to recover from bad financial decisions.
5. You hold their feet to the fire. There was a line from the comic strip Peanuts: “No problem is so big or complicated that it can’t be run away from.”
Human nature: People procrastinate.
An advisor: Raises an issue like retirement planning, helps a client develop a plan, reviews progress to goals and focuses their attention.
How to say: We both need to see a report card. To see how my recommendations are performing relative to the market and measuring your progress towards the goals you set.
6. Diversification. Some investors think if they owns lots of different things they are diversified. Sometimes they are surprised to learn they are the same thing.
Human nature: Have a hunch, buy a bunch.
An advisor: You show clients the importance of risk tolerance and asset allocation along with style and size investing.
How to say: Things don’t go up in straight line. Sometimes they don’t work the way we hoped. We need to take steps to protect ourselves against assuming too much risk.
7. Tax consequences. The government is your silent partner. You take the risks. They share in the rewards.
Human nature: No one ever went broke by taking a profit.
An advisor: You help keep score tracking realized gains and losses during the year.
How to say: Sometimes the best strategy is to sit tight, do nothing and let a company’s management do their job.
8. It’s possible to make money in declining markets. Sometimes it appears that making money is not an option. That’s not always true.
Human nature: Some investors think “the smart money gets out first.”
An advisor: Often knows the money needs to go somewhere. It doesn’t go under the mattress. They understand sector rotation.
How to say: It’s possible to invest based on the direction you think the stock market will take. Some stocks pay you (dividends) while you are waiting. Other times different sectors start coming into favor.
9. Everyone is making money off the investor. Those big firms offering commission free trading are making their money by magic.
Human nature: Free really means free, so why should I pay someone?
An advisor: Understands investing is complicated. Execution is important. They explain the fees clients are paying instead of leaving it up to them to figure out.
How to say: Let me explain how we make money…”
10. Acting, not reacting. Financial news on cable TV has made investing into a spectator sport.
Human nature: Investors see sharp moves in the markets. They panic.
An advisor: Keeps a client focused on the fundamentals and long term outlook.
How to say: Lets step back and put things into perspective. Look out the window. People are going about their normal lives.
11. Hand holding. It’s been said the return of the average growth mutual fund is higher than the return of the investor owning the fund.
Human nature: Buy high and sell low, thinking “This time it’s different.”
An advisor: Keeps in contact. Fills them in on the bigger picture. Shares the advice of their analysts.
How to say: Because you are diversified, this market move isn’t as bad as you think relative to your own portfolio.
12. Someone on your side. You aren’t a disinterested croupier in a casino. You have an interest in seeing your client succeed.
Human nature: Everyone thinks of themselves first. They are making money at my expense.
An advisor: Understands long term relationships are based on the trust that the advisor is acting in the best interests of the client.
How to say: I would like this to be a long term relationship as I help you make progress towards your goals.
As an advisor, you are a professional. Sometimes your value gets minimized when someone decides “Investing is easy.”