If you ask a random person on the street if today's investor needs a financial advisor, they would probably say no. Today, people can trade almost for free, buy ETFs and index funds or outsource portfolio management to robo-advisors. They might mention the market has been rising for about nine years. "No, I don't need an advisor," they'd say.
10 Reasons. Really?
Yes, they do. Some of these reasons can be explained to a prospect. Other reasons remind you how you help people and add value.
1. Investing is complicated. It's more than buying and selling stocks and ETFs. There are insurance products indexed to the market. Hedge funds. REITs. Mutual funds. Managed money. Preferred stock. Convertible bonds. Treasuries. Different products serve different purposes. Someone needs to help investors make sense of it all.
2. It's a big world out there. The US represents about 40% of world stock market capitalization. The Japanese, Chinese, Hong Kong and the U.K. stock markets round out the top five (out of 35 major countries) with an additional 26%. These markets trade in different time zones. Their performance isn't necessarily correlated. If the U.S. market is declining, there could be a rally going on somewhere else. But how do you buy into that market?
3. International doesn't mean what you think it does. Investors might think U.S. companies make their money in the U.S. and overseas companies make their money in other places. Some U.S. companies are highly reliant on overseas earnings. Recently, about 61% of Apple's revenue came from outside the US. (2) According to Mercedes-Benz maker Daimler's 2017 annual report, about 25% of the German company's revenue come from the U.S.
4. Time. Does the average investor have the time to do research, stay on top of breaking news and market action across multiple time zones? This is an area where an advisor can help. They aren't staying awake 24 hours watching the markets, but many have a huge firm behind them with research departments and analysts on the ground in local markets.
5. TV and cable news doesn't help. Television programming is funded by advertising. Advertisers want viewership. One of the best ways TV news programs can keep people watching is to make everything a crisis. The market doesn't rise and fall anymore. It soars and plunges. You've seen the statistics comparing the return on the average growth mutual fund compared to the average fund investor. They tend to buy high and sell low. Hand holding and putting things into perspective has a value.
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.
