Important information for people with retirement plans
Did you know?
If I told you that people who perform their own auto repairs experience almost double the car problems compared to those who use an experienced mechanic, would you be surprised?
What if I said that people who try to invest for retirement on their own have almost 50% less in their accounts than those who use an experienced financial advisor?
Would you be surprised?
The proof is in the numbers. According to a recent study by Charles Schwab, 81% of people with a self-directed brokerage account in their retirement plan do not use a financial advisor – and on average, they have $214,909 less than in their account compared to the 19% who do use an advisor.1
That’s a lot of numbers right off the bat, so take a second to read that again. As the study reports:
“Only 19% of those holding self-directed brokerage accounts use an advisor. However, they have an average balance of $449,552, nearly twice as much as the $234,643 reported by non-advised participants.”
Self-directed brokerage accounts are accounts inside retirement plans that investors can use when they want to invest in stocks and mutual funds not available in their normal retirement plan. But the value that an experienced advisor can provide is not limited to these types of accounts alone.
Here’s why you should consider an advisor if you’re serious about retirement:
Imagine two people, Joe and Jane.
Joe manages his own investments. He’s a smart man, so he takes time to do some research. He can explain the difference between a mutual fund and an ETF. He knows how Apple’s stock has been performing. He checks the markets every day.
But soon, Joe realizes there are a lot of options out there – as in, hundreds upon hundreds. It would take hours, days, weeks, months, years to research every mutual fund, never mind figuring out which one is right for him. Now, Joe just doesn’t have that kind of time to do all that research – nor does he have access to the tools or training that would make that research easier. So, in the end, he puts most of his money into individual stocks, mostly for companies he’s seen on TV a lot.
Jane, meanwhile is equally busy. The difference is, she knows what she doesn’t know. In this case, she doesn’t know which investments are right for her goals, or her comfort with risk. She really wants to know she’s on track for retirement, though, so she works with an advisor who reviews her options, helps her make choices based on what she’s comfortable with, and spend almost all day, every day, doing the research she just doesn’t have time for. The end result? An investment portfolio that’s both diversified and specific to Jane – as well as one she doesn’t have to spend all her time managing and stressing over.
Now, look. I’m a financial advisor, so am I a little biased? You bet! But let’s go back to that study. What Charles Schwab found1 is that investors without an advisor:
- Allocate a lot more of their money to individual stocks than people with an advisor.
- Are less diversified than people with an advisor.
- Have more high-risk “growth” investments than people with an advisor.
- Make fewer trades and re-balanced their portfolios less often than those with an advisor.
In short, the study found that investors without an advisor do less to protect their retirement savings from market volatility or adapt to changing market conditions. They are like cars driving through a rainstorm – without their headlights or windshield wipers.
But there’s one thing the study didn’t say. Perhaps the most important way that an experienced financial advisor adds value to your life is they can hold your hand when the markets get rough.
Market volatility is inevitable – and when it comes, investors like Joe are often prone to panicking. Their retirement savings are going down – and they don’t know why or what to do. In such situations, it’s natural to panic. And when investors panic, they tend to make bad financial decisions.
A financial advisor, on the other hand, is there specifically to keep you from panicking. An advisor can explain why the markets are performing the way they are, and provide ideas on what to do about it. An advisor can help you remain focused on the long term instead of the short. They can act as both headlights and windshield wipers when the markets get stormy.
In short, an experienced financial advisor can provide a lot of value. The proof really is in the numbers. Only 19% of those holding self-directed brokerage accounts use an advisor. However, they have…nearly twice as much as non-advised participants.”1
Of course that doesn’t mean an advisor is right for everyone. But isn’t it time to find out if one is right for you?
If you answered YES, then please call our office at 301-294-7500 for a free second opinion on the current state of retirement savings. Together, we can look at your portfolio to determine whether you’re on track to reach your goals, if your investments are properly diversified, and if you are growing at the rate you could be. What you do after that is up to you – but at least whatever decision you make will be an informed decision!
The proof is in the numbers. Call for a free second opinion of your numbers today!
1 Karen Demasters, “Advisors Show Value Handling Self-Directed Brokerage Accounts,” FA Mag, November 27, 2018.