The value of advice
We get asked a lot about the value of having a financial advisor. This is a complex topic that deserves a pretty broad answer but we can start here:
The value of an advisor isn’t in achieving higher returns.
Yes, you read that correctly.
At Trace, we believe the value of advice is much more complex than simply achieving higher returns. Returns are one objective of advice (and an important one at that!) but by boiling down the value to a simple number, we believe you are missing the bigger picture, so allow us to explain…
Like fingerprints, everyone’s financial situation is unique to them. It’s informed by their income, net worth, time horizon, family circumstances, experience with money, and a myriad of other factors. A good advisor understands the things that make you unique and advises you on the challenges presented by your situation and opportunities available to you to conquer them. Investments are an important component of your complete financial life but they are just that, a single component. Put most succinctly, our friend Carl Richards at The Behavior Gap describes the role of investments as follows:
Examining important issues like risk tolerance and capability, estate planning, behavioral biases, goal planning, and asset location strive to provide better financial outcomes.
So what does a great advisor help you do? Here’s a list of the five most important things I believe a great advisor does:
- Creates a plan that is both tailored to your unique circumstances and dynamic through time. We know unexpected changes will come your way and a plan can help you better understand how these changes will impact your financial life.
- Helps you understand the drivers of your financial success. This can be as simple as knowing what returns you need to achieve you reach your financial goals or as complex as locating assets in more tax-advantaged jurisdictions to maximize after-tax returns.
- Organizes and presents your financial information in a way that is meaningful to you. Are you someone who utilizes technology efficiently or do you prefer to work in an “old school” fashion? A good advisor should be able to adapt to your style.
- Implements your portfolio utilizing the most advanced financial science and academic data available. This has the dual benefit of both investment and cost efficiency.
- Acts as a calm force when investments don’t work as we hope they will. We know markets don’t always perform the way we want them to on a day to day basis; a good advisor understands this and can help explain how undesirable outcomes can impact your total financial life.
At Trace, we believe in the value of good advice and we think that once you get to know us, you will too.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.