April Newsletter: Do you really need a Financial Advisor?

Wednesday, April 1st, 2015

In February of 1993, I started as a green horn financial advisor with Shearson Lehman Brother’s (later to become Smith Barney, the firm that “made money the old fashioned way, they earned it.”)  It was a great time to get started because Wall Street had figured out that people were sick of dealing with “Stock Brokers” who cared more about the commissions than the investments.

In contrast, my training class was one of the first to emphasize a holistic, financial advisor approach to working with clients.  One based first on gaining a thorough understanding of a client’s Assets, Liabilities and Estate Planning needs and then advising them which investments and services were best suited to promote their long term financial well-being.  It’s a great approach and one that I have spent nearly half my life working to perfect.  But it’s not without its detractors.

Most suggest that paying someone for these services is foolhardy since many can do it on their own.  On the surface, this statement is true, many people can do it on their own. But, to do so well, requires far more time than most people can devote.  Not only time to get up to speed, but even more time to stay up to speed.  Let’s face it, the global economy is a big place with a lot of moving parts.  Trying to stay current on a part time basis, often ends in disaster.

In spite of this, the detractors keep coming.  Their latest incarnation is the Robo-Advisor.  Simply answer the 10 questions and the algorithm will select your investments.  Who needs to hire a Financial Advisor when a computer can do the work for you?  George Jetson might be impressed but not me.  Even the devout numbers guys (including myself) understand that selecting investments is part science and part art.

The reason is simple, people invest, not computers. And people and their human emotions are complex (Don’t believe me, just ask your significant other).  Which variety of factors are necessary to entice people to invest is very complex and ever changing. And which straw will break the economy’s back and send investors scrambling? Well, even Alan Greenspan will tell you that’s a hard one to determine.  For this reason, there will always be a human element to investing—a person who gathers the analytical data (the science) but who also studies the economy and gauges the mood of investors (the art) to determine how best to invest.

For our clients, most have seen the value in what we do and for that we are grateful.  And what about the people who have embraced the Robo-Adisor.  Well let’s hope that George Jetson and the people over at Spacely Space Sprockets did a good job with the algorithm.  But I’m not so sure.