Why You Need a Financial Advisor

“Why should I hire a financial advisor when I can just buy the S&P?” If I only I received a dime every time I heard that question, I could quit writing this blog post and retire early. To be fair, it’s a good a question and one you should ask any financial advisor you are considering hiring. There are many acceptable answers, such as “I will help you save money on taxes”, “‘Buying the SP500’ is not a comprehensive financial plan”, and “There’s a lot more to invest in than just the SP500”.

For the purpose of this blog, though, I am going to focus on a particular situation that I encounter often. Ironically, the potential client most likely to ask this question is the one sitting on the biggest pile of cash. I encounter it all the time, hundreds of thousands of dollars in a high yield savings account, or, worse, checking, and they cannot fathom the idea of paying 1% of their investment to a financial advisor each year. My question is always, “If you can just buy the SP500, why haven’t you?”.

Inertia is a powerful force, and not doing anything and keeping the status quo can feel powerfully comfortable. They often know that cash loses purchasing power to inflation and that owning the SP500 over the long term builds wealth, but they don’t know how much or when to invest. Seeing the market go up and down creates both anxiety about losing money and FOMO (fear of missing out) on gains, so they just keep waiting for the right time. The word clients use most often to describe this feeling is “paralysis”.

A good financial advisor will help clarify the best path forward. Rarely that involves keeping the cash as cash, and most often it involves investing a portion of the cash and keeping the rest safe, and this balance will be different for everybody. For many, just buying the S&P makes sense in theory, but is in fact too overwhelming to execute. In this context, paying a 1% management fee is pennies compared to the wealth building power of a uniquely tailored financial plan and investment strategy. If this sounds like you, now is always the best time to do something about it!