Written by Tom Stanley, Investment Adviser, 25 February 2022
What is the role of an Investment Advisor?
The landscape of investment and advice has changed materially over the last few decades. KiwiSaver and retail platforms such as Sharsies have knocked down barriers to entry and individual investors can research, trade, and build portfolios all from their cell phones.
So how do advisors add value when investors can do it themselves?
The role of an advisor has changed from offering tips, and placing trades, to providing comprehensive services and advice. The focus used to be, and for some still is, on beating the market as the ultimate barometer for success. But we appreciate there is more to an investor’s financial goals than just outperforming year to year. For some, value is defined by achieving peace of mind, to not worry about the daily ups and downs of the market, leaving a legacy, or providing for loved ones. A recent Vanguard study[1] attempts to quantify the value that advisors bring. They estimate an annual 3% net return is added by working with a professional. While that number could be debated, and varies based on the circumstance, when advisors take a comprehensive approach and act in clients’ best interest, they can help investors maintain their discipline, and achieve their personal definition of success.
With the above in mind, now is a time I want to flag that we are here to help.
At some point, all investors face what New York Times Columnist Carl Richards calls “The Big Mistake.” Otherwise known as buying high and selling low. It’s only natural. When the market drops as it has year to date, our instinct is to sell now and stop the pain. When the market shoots up, we tell ourselves it’s time to buy, buy, buy. At Amicus, preventing our clients from making The Big Mistake is our primary job.
| With the recent market weakness, we have seen an uptick in clients entertaining ‘stopping the pain’ – this is as expected. I have previously written about ‘Managing your emotions through the noise’, and right now, the world, and news is NOISY – here are some recent headlines: |
| As advisors it is our job to help you see through this noise, maintain a long-term outlook, and avoid ‘The Big Mistake’ by focusing on your overall financial plan. We cannot control markets, or headlines, but we can control asset allocation, cash flow management and our perspective. To finish this month’s note, I want to leave you with one more sketch and a question: ‘What if, instead of talking about the last ten days and next ten days, we talked about the last ten years and the next ten years?’ |
If taking this perspective doesn’t help, please contact us using details below. We are here to help.
Tom Stanley
Mobile: 021 194 7672
Email: tom.stanley@amicus.co.nz
Greg Stanley
Mobile: 021 644 263
Email: gregs@amicus.co.nz
[1] “Putting a value on your value: Quantifying Advisor’s Alpha” https://advisors.vanguard.com/insights/article/IWE_ResPuttingAValueOnValue
