The Tricky Dance of Finances

Find the right investment coach to create a winning financial portfolio



When searching for a financial advisor, the thought of who might be on the other side of the desk may conjure up an intimidating mental image: a well-dressed person in a crisp, expensive black suit and Italian shoes who taps numbers into an old fashioned accountant’s calculator behind a wide mahogany desk in a high rise building downtown. The idea of using the services of a financial advisor may seem unnecessary due to the abundance of information and the ease of online investing. But just as someone wouldn’t perform dental surgery on themselves, they certainly wouldn’t want to perform delicate surgery on their retirement accounts. Consequently, the right financial advisor serves as an important fiscal guide.

A good financial advisor helps to balance all aspects of their clients’ financial lives, including their bank accounts, real estate assets, investments, annuities, 401ks and more. They also match those items with their clients’ financial goals and chart out the best avenue to achieve them.

Financial advisors frequently obtain research and expertise from specialists who can provide insight and skills that any single advisor may not have. They are the specialists to whom the advisors go when they have a specific need or question. These specialists do not have the face-to-face contact with clients that advisors do, but they are an important part of the team that addresses all investment needs by actively managing funds in order to achieve a goal for that client.

One tool that financial advisors use is an index fund, of which there are two kinds: mutual funds and exchange traded funds. ETFs have gained popularity because they trade like stock shares and can be bought and sold anytime. Most ETFs are index funds, but not all index funds are ETFs. Index ETFs are available in nearly as many flavors as their mutual fund counterparts and can be more attractive to investors for their flexibility and lower costs.

“Index funds are ‘set it and forget it,’ and they only occasionally make changes when the index they are mimicking changes,” says Bill Sherman, president of The Sherman Sheet, a research service for financial advisors based in St. Louis, Mo. “My view is that an individual investor should not try to find ETFs but ought to find a financial advisor who believes in managing their portfolio.”

The advisor should have the expertise to monitor what is happening in a client’s portfolio of Index funds and make changes when they see it, which is an influential factor in deciding to retain and use the services of a financial advisor.

“Successful advisors were able to avoid the damage from October 2007 and March 2009 which took away 50 percent or more of portfolios that were not actively managed,” he says. “Advisors can identify the arrival of new bear and bull markets that last anywhere from months to years and take steps to avoid damages.”

Choosing a financial advisor is not a one size fits all experience. It is important to look for someone who already handles clients in similar circumstances. Ask them about their management philosophy to find out if it is more active or passive. Do they focus only on rewards or on risk? The client’s comfort level is most important when making this choice.

“If a client only wants to buy and hold, the advisor should match that,” says Bill. Active advisors identify the trends wherever and whenever they may occur, then capitalize on the ups and avoid ones that are going down to neutralize or better their clients’ position.

A good financial advisor is able to discuss all aspects of a financial portfolio. “Finding an advisor that will give advice on your 401k is very valuable,” Bill says.

To make the process of finding a financial advisor easier, a client should first get all documents together, including all 401k information, a list of IRAs or rollovers, annuities, investments and anything else that helps fill in the whole financial picture. The number one priority should be to get a competent financial advisor – expense is minimal compared to the advice they can provide.

“People from all walks of life use financial advisors, but the more wealth someone has the more they recognize the need for help,” says Bill. “Anyone would benefit from the advice that advisors give. The best thing to do is find a local financial advisor who believes in portfolio management to avoid risk and take advantage of opportunities.”

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