One of the benefits of working with an experienced financial advisor is that the advisor functions as a second set of eyes. This can make a meaningful impact in your overall financial life.
Particularly as you move toward retirement, financial complexities become more common. Having someone to help you deal with these issues within the context of your financial plan is important.
Poor financial decisions and money mistakes are all too common throughout life, but as you age these mistakes are harder to recover from.
An Impartial, Regulating Support System
All of us have biases and these often come to life when you make money decisions. At times, your financial choices may be at odds with logic, reason, and market history. An experienced financial advisor can help you understand some of the potential consequences from making poor money decisions.
As an investor, it’s important to remember that the financial markets are composed of millions of people. Some of these people have biases and beliefs like your own. Others may have far different opinions about politics, world events, and the markets.
Author/Consultant David Allen says that “it’s easy to distort the truth for your own reasons. ” How real is your version of current reality?
When you consider the various inputs that go into money decisions, are you distorting reality by relying solely on information that supports your beliefs? This can create a very comfortable, yet potentially dangerous space for making good choices.
Frederic Bastiat, a 19th century educator and economist is known for his work on “that which is seen and that which is not seen. ” Money decisions that you make today based on what is seen can impact your future because of what is unseen.
An experienced second set of eyes can bring a fresh perspective to your financial planning efforts. The context that an advisor brings can uncover gaps within your financial life that may have been overlooked.
Opening Up New Possibilities in Investing
A seasoned financial advisor also helps expand your field of vision. While much of the day-to-day financial news relates to the short-term, outcomes as an investor depends on properly understanding your long-term investing time horizon. You’re not investing for next week or next month, but likely years into the future.
Your investing time horizon could be longer than you expect. It’s not uncommon for this timeframe to be decades beyond retirement. As the adage goes, you don’t want to run out of money before you run out of life.
While the right context of time is important, it’s also crucial to have a grasp of what risk actually means during retirement. The misperception of risk as you age is commonplace.
Your overarching financial mission in retirement is to protect your purchasing power. That means your overall income needs to increase alongside inflation. If market history is a guide, you may need to accept some reasonable level of ongoing volatility in order to accomplish your mission.
The operative question is how much volatility or risk is right for you. An experienced financial advisor should be able to help you make that determination and build a plan designed to help you stay aligned with your goals.
Navigating today’s complex financial and investing environment on your own can be overwhelming. Support from a competent advisor can provide clarity and help you feel more confident in your plan.
