A Guiding Light
Leveraging the Right Advice Important Now More than Ever
December 28, 2011
Markets tend to go through cycles. With the recent economic down-turn and current times of uncertainty, a growing number of people are trying to determine where they can get solid advice.
When I started my practice in 1996, I read articles about the increasing supply of financial information available on the Internet. Some people concluded that because of this free-flowing information, financial advisors would become obsolete. The economy had been growing well during the 1990s and the thought was that more people would go it alone in the stock market through participation in 401(k)s and other retirement accounts.
Do You Need a Financial Advisor?
There’s an old saying that goes, “Information is free, but advice is what you pay for to apply the information to your specific situation.” This adage rings true when it comes to financial planning. There are many sources of information on the television, the Internet and financial publications that present a wide array of financial planning strategies. Though information is free, in most cases it is general and not intended for an individual investor to apply to a specific situation.
Have you ever noticed that at some point during the television program or written at the end of the article there is a disclosure stating, “The strategies discussed are general in nature and not intended as specific advice for individuals?” They also suggest that you check with a tax professional or a financial advisor. That is intended to serve as a warning that although the information is free, it might not benefit you. In fact, generic advice can cause problems if applied incorrectly.
For example, there are numerous health-related Websites on the Internet. These free medical Websites provide a laundry list of possible ailments based on the information you submit. You are then left to make a self-diagnosis based on the limited information available. You still have to decide whether to put your health in your own hands or pay a medical professional for help. A doctor will discuss your symptoms with you, ask about your prior medical history and conduct a full examination. That doctor will then apply his or her training and experience to make a diagnosis and advise a proper course of action.
The ever-changing events in your life can be considered symptoms of your financial health. These can include a marriage or divorce, a new baby, a college education, buying or selling a family business, receiving an inheritance or dealing with a change in your employment status or income level. A financial advisor can help you look at your situation objectively, rather than emotionally, which could help you make better decisions.
A financial advisor also can act as a sounding board, helping you stay focused on your goals. Using his or her knowledge in areas such as estate planning, tax planning and investments, a financial advisor can help you navigate through your current income, assets and liabilities, insurance coverage, investment portfolio, tax obligations and an estate plan. An advisor can use all of that information to identify strengths and weakness, opportunities and threats unique to your situation and present a course of action.
It is important to take the time to interview several advisors during your search. You should take note of how advisors respond to your questions. Most advisors will provide you with a complimentary meeting where you can learn more about their experience and financial planning philosophies. You should also discuss any financial planning fees or costs that you can expect, so that you can feel comfortable with how you choose to receive advice.
A good advisor can help make the planning process easier and enjoyable. Not only will you be able to get answers to the questions you ask, but you might also get answers to questions that you didn’t think to ask.
Even after you find an advisor you feel comfortable with, you still need to be actively involved in the planning process. Just remember that no one should be more interested in your financial planning needs than yourself. Your advisor can provide strategies and recommendations, but the person ultimately responsible for taking action is you.
John F. Holmgren is a financial advisor at Ameriprise Financial Services, Inc. (www. ameriprise.com). He can be reached at John.firstname.lastname@example.org