More than just Investments

By: Kevin Boland, CPA, MST, Executive Vice President

Recently I was reading an investment newsletter that called my attention to a bet made in late 2007 by legendary investor Warren Buffett with a hedge fund manager. The bet was simple: the S&P 500 stock index would outperform a portfolio of top hedge funds over 10 years – an implicit bet that even the best and the brightest couldn’t consistently beat the market’s performance.

The manager’s hedge fund was coming off a 5 year period where it had substantially outperformed the S&P 500 Index so his willingness to take the bet may have involved a measure of professional pride. Buffett’s position is a bit more surprising since his career is Exhibit A for those who argue that a skilled investor can best the averages. Five years into the bet, the S&P average was winning.

So why use a financial advisor? Why not just invest in low cost index funds? As I’ve learned, occasionally the hard way, but more often from the financial advisors I’ve been fortunate enough to work with over the years, a financial advisor can and should help you with more than just investments. Working with hundreds of clients on issues similar to those confronting you gives us a broader perspective than you may have and experience with a variety of potential solutions. In addition to investment management, most of our clients encounter common wealth management issues at some stage in their lives including education planning, business planning, family risk management, cash flow and debt management, retirement planning, legacy planning, and special situations.

We can review these areas with you and determine which are the most relevant to you at the current time, help you develop plans to address areas of concern and prioritize implementation of those plans. As your plans and circumstances evolve, we can help you adjust your plans to address these changes and help you do so in a cost efficient way.

It’s not all about the investments or the performance of the investments. Rather, it’s about determining and prioritizing goals, developing plans to achieve them and executing those plans. It’s about having an advisor who can offer balance and perspective as changes in investor sentiment drive the market up or down. It’s about having an advisor who helps you position yourself so you aren’t forced to sell when the market drops, or who sees your panic as the drop is occurring and reminds you that rather than racing for the exits, you might instead look at it as a buying opportunity.

As one of our favorite 401(k) advisors always reminds, when you go to the store and find out the Buy One – Get One Free sale is on, you don’t decide to leave and return when everything is again full price. Buy low – sell high. It’s about reminding you of your goals, your plan, and your progress in achieving it. It's about encouraging you to stay the course, or be cautious when the market is on a tear and you want to jump on the latest hot stock, hot fund or initial public offering. Don’t chase performance – when your plan is working, stick to it. Before cashing out your IRA early and paying taxes and early withdrawal penalties, consider other options. When your tax bracket is zero, consider the Roth option in your 401(k) or IRA account.

There are countless examples as unique as your particular circumstances where your financial advisor can help position you for success. Looking for a financial advisor? See us to discuss your unique situation.

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