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We live in a world that encourages us to DIY – “do it yourself” – in everything from remodeling our houses to building our own websites. While smart, dedicated people can certainly accomplish a lot, professional expertise is still extremely valuable, especially when it comes to investing. New data from a Natixis Global Asset Management survey of 750 U.S. investors shows that most investors can benefit from working with an advisor, broker or other financial professional.
“Our study found that many investors lack the necessary investing knowledge and professional guidance that is so crucial to achieving successful savings outcomes,” says David L. Giunta, president and chief executive officer of Natixis Global Asset Management – U.S. “Today more than ever investors need the support, expertise and perspective that a professional advisor can bring to the table.”
The study found that Americans have a low opinion of their own investing acumen, with fewer than one in three (28 percent) classifying themselves as having “very strong” investment knowledge. Most (54 percent) say they don’t have a financial plan, and nearly as many (45 percent) say they don’t even have clear financial goals.
Among investors who do have financial plans in place, many are not being realistic: On average, they expect they’ll need 62 percent of their pre-retirement income to live on once they retire – much less than the 70 percent to 80 percent that many experts believe retirees will need.
While investors readily acknowledge their lack of investment knowledge, goals or planning, they’re not doing much to improve their skills. Nearly half say they spend more time planning vacations or home improvements than they do monitoring or rebalancing their investment portfolios.
The bottom line is this: Many investors remain unprepared to manage their investments, lacking the knowledge, the time and – perhaps – the motivation to do all that is needed. With Social Security and pensions playing a diminishing role, and an increased need for other investments that can generate retirement income, under-advised Americans could enter their golden years unprepared and short of money – placing at risk the secure, dignified retirements they have worked so hard to achieve.
Financial professionals can play an important role in helping investors reach their retirement goals. Here are seven ways they can assist individuals in reaching their goals. Advisors can:
1. Help investors articulate their reasons for saving and set clear goals. Saving for a college education in 10 years requires different strategies than preparing for a retirement decades in the future.
2. Assist investors with developing a financial roadmap. Yes, we can’t predict the future – but a good financial plan can help investors make progress toward their goals while mitigating market volatility and other uncertainties.
3. Provide investment expertise. Some investments that would benefit a portfolio, for example alternative investments, can be complex. A trained professional can provide the knowledge and expertise investors require to select the appropriate products and strategies for their needs.
4. Offer an independent perspective. Perhaps the single biggest threat to any portfolio is human emotion. Discussing market volatility with a knowledgeable advisor who can put events into a historical context can help take emotion out of the equation – especially during rapidly rising or falling markets – providing a sound platform for investors to make better decisions.
5. Create portfolios that can generate growth or income while minimizing risk. Advisors can help investors build durable portfolios that are consistent with their risk tolerance and are designed to enable them to stay invested and focus on long-term goals.
6. Identify and provide access to the right products. Not every investment product is appropriate for every portfolio. A good advisor can help select the investments that make sense given an individual’s goals, risk tolerance and time frame.
7. Implement a financial plan. Let’s face it: Executing a financial plan isn’t easy. Beyond “paralysis by analysis,” many investors never get very far because the steps needed to implement a plan can be overwhelming. Advisors take a broad view of planning, incorporating not only savings goals into the plan but also current spending patterns and personal budget analysis.
Many investors already avail themselves of professional advice. Forty-seven percent have an ongoing relationship with an advisor, and the findings from the study clearly show the benefits. These investors have stronger investment knowledge and clearer goals and plans; are twice as confident that their retirement plans are on track; and have a better overall understanding of risk and how alternative investments work than investors who don’t use advisors regularly.
“Investors need durable portfolios that are consistent with their risk tolerance, intended for the long haul and designed to enable them to stay invested and focus on long-term goals,” says Giunta. “However, there is no paint-by-numbers investment strategy. While some investors may be successful on their own, the majority of them will be more successful in meeting their goals if they have an advisor by their side.”