If given the task to outline the key features of working with a financial planner, the usual topics of retirement, investment selection, insurance and tax planning tend to feature prominently. In fact, when sitting down with an advisor for the first time, you will find the discussion focusing primarily on these areas. However, over time and throughout the ongoing professional relationship, it should become apparent that the most impactful value-add will often come from unexpected directions…
Throughout your professional and personal life in Japan there will be no shortage of major, often unexpected, events. Changes in your career, death in the family or divorce, buying a first home, starting a family, considering whether to move out of Japan for a short or long period of time, thinking about which education path to send kids while in Japan… these are all just some of the bridges that will need to be crossed with regularity. Oftentimes, these are also the kinds of conversations that could be difficult to have with friends or colleagues in Japan. For example, friends and after-work socializing with colleagues often fills the role of providing a casual environment for reducing stress and having a brief sanctuary from the difficult but necessary decisions in life. A reluctance to intrude upon or damage those otherwise casual and cheerful relationships is well founded. Also, it could be the case that your friends or colleagues might not be in a similar enough situation, or have sufficient experiences to draw from to fully empathize or provide meaningful feedback for your specific circumstances. A knowledgeable financial planner would not only have a comprehensive understanding of your full situation, but would also be able to draw from the experiences and stories of hundreds of others that have found themselves in similar circumstances, what their options were, what decisions they made, and how each scenario played out.
More than just picking the investments
A full service financial advisor does quite a bit more than simply choose your investments. These days, DIY finance is covered in depth online. In fact, through our Insights series, we aim to provide tools and guidance to assist you in that endeavor, should you choose that route. If you put in the necessary time and research, it is not insurmountable to set up an account and buy a stock, bond, ETF, or fund. Whether it be personal health and fitness, choosing investments, renovating your house, or even attaining advanced diplomas; anyone can DIY just about anything, given enough time and resources. This, however, is where the rubber tends to hit the road. In the advanced information age, time is becoming the scarce commodity; and regardless of an ability to DIY something, offloading the heavy lifting to an experienced professional typically becomes the logical conclusion. In fact, that’s what the wealthy do…
In addition, retaining the services of an experienced financial professional provides considerable benefits throughout the life of an investment. For example, after setting up an account and buying an investment, what comes next? Was this particular ETF a good choice? On which index should I focus? How often should I re-assess by portfolio weightings? What happens to my investments when interest rates change? I just received notice of major managerial change in the company in which I invest, or it is making headline news… what should I do next? How will a changing political landscape impact my investments? What could be the tax implications of my decisions? How will taxes change in the future? The market has been down for a little while, should I sell out or hold on? The market is considerably up, should I sell or continue holding? While any one of these questions has the potential to impact your sleep at night, an experienced professional that answers such questions all day every day could provide you with a definitive answer in a single phone call or email.
Managing investor emotions
Another key characteristic of the present-day age is the tendency to over sensationalize events. In order to obtain clicks, sell papers, or grab TV viewer attention, seemingly every news outlet has become addicted to punchy headlines. While in the past this behavior was limited to only the more political and op-ed pieces, sensationalism and politicism has seeped its way into major financial press outlets. An average investor could be forgiven for interpreting the front page of each newspaper or news website as being either filled with doomsday omens, or gospels of market booms. The reality of the typical boring up or down day simply does not sell very well. Accordingly, a financial professional who is likely to be reading from professional-grade and less sensational financial news sources, who has seen the tides come in and out for many years, is best positioned to be able to sort through the hyperbole and confirm for you when something is serious and worth considering, and when a headline is just a headline. The result: you get to spend your time on the things that matter to you.
Do I need a Financial Planner?
Every adult needs a sound financial plan. It is also imperative that this plan be revisited and potentially updated or revised on a consistent basis as you move through life and your career. Not everyone has the need to retain professional services, but choosing to both not have a planner and not make and maintain a plan yourself is the worst outcome of the three possibilities. To asses, we would recommend considering the following:
- Do you have the specialist knowledge and financial experience required to make the planning decisions and manage the ongoing events yourself, as they arise?
- Would you describe yourself as someone who has enough free time to do all research, decision-making, record keeping and reporting for your investments?
- Do you have a genuine interest to continue doing all necessary research, decision-making, record keeping and reporting for the next two to three decades?
As outlined above, managing and maintaining a financial plan is certainly not outside the realm of possibility to be done on your own. However, receiving ongoing assistance from a professional financial planner will free up time and head-space, ensure you stay on the right track, and provide you more value than just picking your investments.
With a Little Help from My Friends (and My Financial Planner), Mariko Lin Chang – Social Forces Journal, Vol. 79, no.3
Financial Education and Retirement Savings, Robert L. Clark – Social Science Research Network, 2003
The Retirement Savings Crisis, N Rhee – Washington DC: National Institute on Retirement Savings, 2013