Value of a Financial Professional

Many people are comfortable with a do-it-yourself approach to the tasks of everyday living. But when it comes to investing, more than 60% of all mutual fund investors turn to a financial professional for advice and guidance.

Professional credentials

The term “financial professional” applies to individuals, within a wide range of occupations and titles, who have been trained to serve the financial needs of investors. The Securities and Exchange Commission, a federal bureau that monitors investment activities, requires anyone who gives investment advice to file a form that details the advisor’s services and practices. Most states go a step further and require financial advisors to pass an exam. 

Expert advice

You can expect a financial professional to help you articulate your financial goals, then formulate a long-term plan for achieving them. A financial professional will suggest an asset allocation that is suitable for your specific goals, time horizon and risk tolerance and recommend investments that are consistent with your plan. With more than 8,000 mutual funds to choose from, busy investors know the difference it can make to have a financial professional who can cut through the clutter. Financial professionals are experts in personal financial planning, but they may also have expertise in a related field, such as accounting, estate planning or insurance.

Because the markets change, as do an investor’s goals and dreams, a financial professional will also monitor your progress, recommending changes where appropriate. Most financial professionals meet with clients two to four times a year.

An objective perspective

A financial professional provides investment advice, but research points to an even more important role: protecting investors from their own bad behavior. Impulsive actions, such as taking a flier on a hot sector or pulling out of a falling market, can set an investor back years, as evidenced by a recent study by DALBAR, a Boston-based financial research firm.1 It revealed that investors who dodged in and out of their stock mutual funds in an attempt to “time” the market lost money, while the broad stock market averaged a gain of 12.89% per year.2
A financial professional can help you put current market events in perspective, which may account for the fact that investors who work with financial professionals report that they are more confident than do-it-yourself investors.3  It’s also easier to be a disciplined investor with the help of a financial professional. And discipline is an essential element in long-term investment success.