Episode 12: Do You Really Need a Financial Advisor?

Isaac Wright: Welcome to Wright Money Tips! This is going to be a really good show today. Let me tell you why, because a lot of us and really, quite frankly, a lot of people in general, when they go on the Internet today, they can use search engines to find various topics related to finance or any aspect of their financial plan.
You have emails, you have newsletters, you have television shows. So, the question can naturally come up, “Do I really even need a financial advisor?” Well, that’s going to be a great conversation for us to tackle today. Today, I have Aaron Reed with me. Aaron is one of our associate advisors here at Financial Dynamics.
We talk about this quite frankly, behind, let’s call it closed doors when we have meetings just because we have various people that come in at various points in let’s call it that a timetable of determining if they want to have somebody that knows who they are. Aaron, welcome to the program today.
Aaron Reed: Thanks, it’s good to be here.
Isaac Wright: So, listen, I think it’s good to kind of cover it two ways. A lot of you, when it comes to, let’s say choosing a financial advisor; I’m going to give you a couple of things that we hear on our end of the fence and it’s going to be pretty straight forward today.
Also, what I would call, maybe some characteristics of why you would want an advisor. So, let’s start off with what I wrote down. First thing is, when it comes to the amount of information as we just covered, Aaron, I think the number one thing we find a lot of times is, “Does somebody have the time to dedicate to their own finances?”
I think maybe that’d be a great way to start our program today and having that conversation. I think that could be a big reason why somebody would want to either ultimately choose an advisor or not.
Aaron Reed: Yeah. It’s just like a lot of other things, you know. Do you want to spend a lot of your time and resources to sit down and create a financial plan, whether it’s just your time or the software or the tools? You know, if I want to change the oil in the car, I know how to do that, but I’m probably not going to rebuild the engine. It’s much more efficient to pay a professional that has the right tools and the right expertise to do that kind of thing.
Isaac Wright: Well, you know, here’s the thing. Again, like I said, it’s a double-edged sword because you can Google any term you want to under the sun and you get a hundred thousand hits that doesn’t necessarily mean, I mean that you’re going to be able to extrapolate all that information and create a plan from it.
So, you know, I would say in today’s world, especially as we come out of COVID and people are really starting to value their time, even more, valuing experiences and making sure that they have time with their loved ones, I think having a financial plan that can be specific to your situation where somebody can be able to take some of that time off the table in terms of what you would have to put in.
Let me just put it this way. I’m not saying you have to hire somebody, but at least I would think about that from a mindset perspective as you lead into a conversation because finances can be delicate, but also too, I think that can be very impactful if you have somebody that knows who you are. But let me go ahead and talk a little bit about the next thing that we wrote down here. This was something that probably also comes into play just because of time management, but procrastination and are you a procrastinator? I think that’s a conversation in a way that you need to have with yourself. And if you are a procrastinator again, whether or not you want to hire somebody or talk to somebody, but why don’t you just kind of fill in the blanks on that?
Aaron Reed: Yeah, I think, you know, it’s never too early to get started. The sooner you can get started, the sooner you can come up with a plan. Whether you create it yourself, or whether you work with someone else, then you can check on it every year versus waiting until the last minute and then retirement kind of sneaks up on you and then it’s like, you know, maybe there are some things you could’ve done a little bit better and if you started a little bit sooner, you might be in a little bit better position.
Isaac Wright: Well, you know, in our last show with Ricky, we talked a little bit about the things that cause urgency. So, when we talk, let’s call it in the various ways where people, especially if they’re younger and maybe they have too many things going on; but if they have a job loss, a death of a spouse or a loved one, those things bring financial planning to the forefront.
So, you know, I think also too, Aaron, we’ve talked about this when we’ve come out of meetings, the opportunity to meet with an advisor doesn’t necessarily mean you have to hire them on a first visit. But, it is good to kind of get a feel for what you would want to expect and you may want to talk to several advisors. I want all of you to realize that, I think we run a pretty nice firm here, right in Midlothian. But have a lot of friends that have financial planning firm practices. I’ve done a lot of consulting and coaching, and there’s a lot of different personality fits to whether or not you have somebody that you want to attach yourself to when it comes to understanding who you are and what goals you’re trying to accomplish.
Aaron Reed: Yeah. You know, I think it’s a little bit different for everyone when it comes to, “Do I need an advisor?” One kind of challenge that I feel like the individual investor faces is just defining the term financial advisor. You know, that’s kind of a blanket term. There are a lot of different licenses out there that an individual can hold that will allow them to provide different products and services, but by and large, they’re all referred to as financial advisors. So even here, we carry multiple licenses, and we might work in different capacities for different clients. So, to answer the question, if you need an advisor, the first thing to do is just figure out, “How much value is that particular individual going to bring to your overall situation?”
And I think here, we provide a lot of value. We hold multiple licenses, but I think really the fee-based advisor structure is what most people are gravitating towards. That’s what I like the best, because then the only way to completely rule out conflict of interest is just to make sure you’re paying a fee for that advice and you’re getting the very best advice that you can get that is going to fit you. And it’s the very best advice you can get for your particular situation.
Isaac Wright: Yeah. I think compensation, as long as people have transparency with whoever they decide to work with, I think that’s also a big deal. You just need to be able to understand how the compensation structure would work relative to the value that you receive.
Sometimes you kind of jumped the gun and we’ve had people that say, “What are your fees?” Well, first of all, what are the goals and what are the things you’re trying to accomplish from there? You can reverse engineer a scope of work and then put together a fee structure that hopefully would make it a win-win scenario.
Let me just play off of that a minute here, because actually this is what I wrote down and I’m going to read this right off of my notes here, “I’ve had a bad experience and I’ve decided to go it alone and I prefer it to be that DYI, do it yourself type of person.” Not that there’s nothing inherently wrong with that, but from that mindset approach, Aaron, why don’t you discuss a little bit about when we come out of meetings sometimes with somebody that’s in that kind of frame of mind, some of the pros and cons.
Aaron Reed: Yeah. You know, it’s unfortunate that somebody may have had a bad experience, but it happens. And then they kind of get that in their mind that the financial advisor, maybe all of them are like that particular one that they might’ve had a bad experience with.
When, like I said, there’s multiple different ways a financial advisor can, can work for you. So, sometimes that’s a hurdle to get over, but typically once they see the way it’s supposed to work and the value that you can bring to the table is defined and kind of a more tangible way, whether it’s with a plan or a second opinion on what somebody currently has, then it helps them feel more at ease about the process.
Isaac Wright: Yeah. Well, speaking of which, I want to say this, most firms, if they’re doing a good job, have a process, have a situation where they can walk you through steps that allow you, not the advisor, that allow you to be able to have the pace of play needed, to make a decision that, let’s call it effective for what you’re trying to do.
Again, for my background in over 20 years, I’ve had a lot of consulting relationships within the industry. We’ve served hundreds of families here, right in Midlothian. Not everybody becomes a client here and that’s understandable and that’s okay. I think at the end of the day, you have to feel good about what you do.
Aaron, I think probably too, because I think we’re on a roll here. Are you, as we talk with people that are getting older at times and I’m going to leave it like that, because I don’t want to put any age out there. The main thing is this is what happens to you. If let’s say you are somebody that does it themselves, you’re a do it yourself person.
You’ve done all of the planning. You do all the investments. You’ve done everything from meeting with all the professionals and so forth and you die, you pass away. Now what happens? And that’s a big deal because last year we probably had 15 to 20 deaths either directly or indirectly that impacted clients here at the office.
Aaron Reed: Yes. In my opinion it’s a huge, huge value add to have a place where, your loved one can come. Ideally, we try to involve the husband and wife and everybody in the whole planning process so that way nobody’s completely in the dark, but at the same time, they have a place that they can go that they’re familiar with.
They, we, have a very trusting relationship and it just makes having to worry about trying to figure out finances is the last thing that you want a loved one to deal with when they already are dealing with a loss. So just that component, there is a huge, huge value add at working with an advisor versus a do it yourself or passed away and now, a significant other has really no idea what to do, who to go to. It’s sometimes a tough situation.
Isaac Wright: Well, probably a good thing to say is with us being advisors in the capacity that we serve others, we have to depend on people ourselves. And I think you have to surround yourself with people because at the end of the day, if something happened to me, I wouldn’t want Andrea, you wouldn’t want your wife to be in a situation where they’re out in left field. And again, we’ve seen the opposite where the wife has run the show with a lot of the financial affairs. The husband’s kind of been more of a step-back person. Very rarely, I will say, very rarely do I find a husband and wife that are on top of it, always with all of the finances because it just naturally occurs where you kind of gravitate to where, let’s call it the highest and best use of your kind of your personality if you will.
So, Aaron, before we wrap up today, is there anything you want to add to this? Because I think there’s a lot of good nuggets in here for people considering whether or not they should even work with or hire an advisor.
Also, if they’ve already hired an advisor, whether or not you’re in a situation, if you have an advisor, but you don’t have that warm and fuzzy feeling. Hopefully again, some of these nuggets are things that you can take back to that advisor, have a communication line with, or if you want, feel free to reach out to us. But anything you want to wrap up with?
Aaron Reed: I would like to try to put a fine point on things and I think two of the most important things that a good, trusted advisor can bring to the table are the technology suite that we use today is more advanced than I’ve ever seen.
It’s not that a lot of that stuff an individual investor can’t just go out and buy that software. And then if they can, they have to learn how to use it. So, a lot of times that can be worth the price of admission, so to speak. And then another thing that gets overlooked a lot is an advisor can help take some of that emotion out of investing for a client and help encourage them to maybe stay the course.
They have a plan that we’ve developed, so, let’s stick to it and stay the course when things get a little rocky versus maybe pulling out or something, making drastic decisions. So, taking that emotion out of the investment is another value add that we can bring.
Isaac Wright: Well, we went through that a little bit in March of last year and of course everything’s been rock ’em sock and everybody’s happy when the market’s up. But, for today, I hope everybody enjoyed our episode of Wright Money Tips. If you have any concerns, questions, reach out to us. We’re happy to discuss any aspect of what we’ve covered today.
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Well, Aaron, it has been another great show. I think we’ve covered a lot of information in a really short amount of time, but hopefully there’ll be some takeaways with people that listen to the show. The program’s reaching a lot of folks now and just giving them some insight about why they need an advisor or not.
Aaron Reed: Absolutely. I’ve enjoyed it. Thanks.
Isaac Wright: You all have a good one. We’ll talk soon here at Wright Money Tips.