10 reasons why people are better off working with a financial professional
Investors can benefit by working with someone whose job includes looking at the bigger picture.
Everyone wants to eliminate the middleman and buy direct from the source. This can get very scary for financial professionals. Who uses a travel agent anymore? (FYI: They are alive and well, but have moved upmarket to the luxury segment.)
On the other hand, few people self-medicate or defend themselves in court. They hire doctors or attorneys instead.
At first glance, investing, doing financial planning or buying insurance looks cheaper if you do it yourself. Why should someone work with you instead of doing it themselves?
1. Insurance is a complicated product. Everyone has stories of homeowners who only discovered gaps in their coverage after a disaster. Health insurance policies might have affiliation or waiting periods before coverage becomes effective. Pre-existing conditions can be another area of confusion.
What people need to know: Different people have different needs. Products might look the same, but they aren’t. You need professional guidance.
2. Ongoing relationship. Insurance shouldn’t be a “one and done” purchase. Consider health insurance. Different products and providers may come into the market. They might be a better fit for the client, possibly even saving them money at renewal time. People need different kinds of insurance at different times of their life – auto, homeowner, liability, health and dental insurance are only a few examples.
What people need to know: You need someone who sees how all the pieces come together and can spot gaps in coverage.
3. Aftermarket support. Most people agree that finding the right company in terms of product, coverage and price is important. Experienced agents will also say that choosing companies that are prompt payers when you make a claim is important, too, although the general public might assume everyone pays immediately.
What people need to know: If you need to make a claim, you want a professional representing your interests handing the details. You want someone on your side.
4. The fiduciary concept. Step away from the regulatory discussion. The consumer wants to work with someone who has their best interests at heart, and most financial professionals do work that way. Why? If the client feels they’ve been overcharged or aren’t getting good service, they vote with their feet. Good agents and advisors seek a long-term relationship. The client sends in more money, buys a range of products and provides referrals.
What people need to know: It’s in the agent or advisor’s best interests to provide great service. Your needs are met and you feel comfortable doing more business.
5. You were referred. The agent’s name wasn’t picked at random. Baby boomers prefer referrals from people they know who are satisfied clients. Gen X and younger people prefer sites like Trip Advisor where they view user-generated content. Someone said they had a positive experience and ‘you should try it too.’
What people need to know: Someone did the research and legwork involved in selecting you and felt confident enough to recommend you.
6. Financial planning. Life isn’t a series of unrelated purchases. People should have a framework or a roadmap to help them reach their financial goals. Someone needs to provide one. They can buy one separately, implementing on their own or completing a financial plan alongside an advisor who also sells products that fit within the plan.
What people need to know: Either way, they need a plan. This often comes from a professional.
7. Expertise. We’ve heard “A little knowledge is dangerous.” Overconfidence can be a grave mistake. You need to understand the process of financial planning, invest with intelligence, not emotion. You need to understand changes in tax laws and the economic cycle.
What people need to know: Financial advisors receive training and usually have continuing education requirements.
8. The economic landscape is changing. Our economy goes through cycles. The US economy and others around the world don’t often synchronize. Interest rates move in cycles. A person who has done well investing on their own may be ideally positioned for the economic cycle we just left.
What people need to know: Investors can benefit by working with someone whose job includes looking at the bigger picture and following research.
9. Hand holding. You’ve seen the statistics. The return for growth mutual funds over time is often higher than the return earned by growth mutual fund investors. It’s human nature to buy high and sell low. Cable TV news sensationalizes the stock market. Often the best strategy is to sit tight.
What people need to know: Financial advisors can be excellent at focusing a client’s attention on the long term, especially when the short term is choppy.
10. Someone to blame. No one wants to say “I made my own investment decisions and I fouled up.” They would prefer to blame someone else if things go wrong, even if it isn’t their fault. It’s one of the tougher parts of being a financial advisor.
What people need to know: People often feel better after they’ve gotten something off their chest. They just need a lightning rod for their frustration, and that is the advisor.
Some people want to eliminate the middleman and invest on their own. But there are many reasons why middlemen add value, and potential clients need to know this.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” can be found on Amazon.