“Best Advice Received by Financial Advisors”
As financial advisors and/or wealth managers we tend to focus the attention on providing advice and guidance to our clients without have the spotlight ever turned back on us. Much like a doctor or physician, when we have financial questions or “ailments” we tend to internalize them because we think we should know all of the answers as “experts” in the industry. The reality is that it is sometimes a simple money tip or piece of advice that we received from someone else that got us interested in the industry in the first place. Recently, a survey was conducted of the top 100 advisors from 2019 to find out what the best money and investing tips they have received. Not surprisingly, the answers are not overly complex, yet the advice stands the test of time. In this article we break down three common themes that were shared across the advisors that were surveyed.
Start Early and Stay Consistent
We hear it all the time, but compound interest really is the 8th wonder of the world. The best advice that we as advisors have received, and the advice we should be giving to our clients is to simply get started. Don’t let perfect get in the way of progress. Start today by creating an automated habit of monthly savings and we encourage you to push yourself until the point is slightly uncomfortable. Why until it’s uncomfortable? Well, we have found that once you have an amount you’ve decided to not see or touch every month (but rather put into savings) that people are resourceful enough to find ways to go without that spending they thought they needed. Across numerous advisors in this survey, the idea of automating savings and being consistent with this savings through market peaks and valleys is the key to building long-term wealth.
Long Term Optimism pays off
A second common piece of advice that has impacted advisors the most is that pessimism usually sounds smarter, but optimism usually end up wealthier. We talked about this a little in last weeks blog post, but the reality is that it is very easy to get spooked by all of the potential doom and gloom that hangs over the stock market. The pessimistic news headlines are usually the ones that garner the most attention and no matter how long you’ve been around we all start to think that “this time feels different”. While we certainly believe that portfolio diversification should be based on someone’s risk tolerance, we also hold the firm believe that in the long run stocks tend to perform better than bonds and bonds tend to perform better than cash. Holding onto these underlying principles of a long-term optimistic outlook tends to bode well for investment returns.
Boring is Usually Better
It’s fun to think about the possibility of 20% returns year on year for your investment portfolio, but the reality is that if something sounds too good to be true, then it usually is. Ideas like diversification, dollar-cost averaging, and budgeting don’t perk people’s interest and usually only excite the nerds among us, but it doesn’t mean they are any less true than the exciting idea of consistent double-digit returns. More often than not, the advisors surveyed pointed back to the idea that consistent and seemingly boring stock investments trounce the returns of those investing solely for growth in the long run.
Now that we are all riveted with the findings from this survey, what can we do about them? Here are a few takeaways regardless of your stage in life. First, if you haven’t started investing, then we encourage you to open an IRA account and work with a financial professional to begin investing. Second, if you have already been investing for years, we want to encourage you to continue on this path and look for ways to increase those savings throughout your working life. Finally, if you have saved and are now reaping the benefits of this in retirement then remember to maintain a long-term optimism in the market and know that staying the course is sometimes the best course of action you can take.
February 7th, 2020