Why Use an Advisor?in Trusted Advice
In a prior post, I discussed some things to look for in choosing an advisor. In this post I would like to discuss why you should use a Registered Investment Advisor (RIA). Many people question why they should they pay someone to manage their money. Can’t anyone manage their own portfolio? Haven’t I seen the commercials with the person trading from home and obviously making great money doing it?
While anyone can do it, doing it successfully is a lot harder than the commercials make it out to be. Having chartered sailboats several times in the Caribbean I often compare investing to that experience. In order to charter a sailboat, you can either sail it yourself, or hire a captain (RIA). Now unlike investing, since you are renting out someone else’s boat, the charter company won’t let you go out alone unless you can prove you know what you are doing. They don’t want their several hundred thousand dollar investment getting wrecked on some rocks because you don’t know what you are doing. That means either a lot of hard won knowledge and experience, or classes and certification. Either way, that can be expensive and take a lot of time. If you hire a captain (RIA), you can go out right away, but it is more expensive since you need to pay them.
When you charter on your own, you decide where you want to go and then have to decide how to get there. To do that, you have to research the local area and plot a course on the charts. You also have to get to know your boat and what it is capable of. On the way you have to pay attention to the wind and any approaching weather patterns in addition to other boats on the water. Once you get to your first destination, you have to either set your anchor or find a mooring buoy to tie up to. At some point, you also have to make sure to charge your batteries so the systems don’t stop working. That's a lot of things to keep track of on your vacation.
If you have hired a captain (RIA), you just tell them where you want to go, what your preferences are and they take care of the rest. They know the boat and its capabilities. Often times, they can give you helpful advice, and have a lot of local knowledge as to where to go and what to avoid. They will know when to reef sails (get more defensive) and avoid storms. If you want to learn more about sailing, many are happy to teach and have you participate. Best of all, you can relax and enjoy your vacation, letting someone else worry about getting to where you want to go.
So while you can invest on your own, to do it well, takes a lot of time and effort that could be spent doing something you really love to do. However, even if you love investing and everything about it, there are some other benefits to hiring an RIA. The biggest one is that having an advisor, or an advisory team, will make sure that someone will be managing your portfolio, even if something happens to you. If you are sick or incapacitated, what happens then? An RIA can keep your investment boat sailing in the right direction and guide it and your loved ones safely to your goal.