Are financial advisors worth the price of admission? (BONUS: my portfolio breakdown)
The pros and cons of financial advisors: is it the right decision?
Welcome to The Profit Zone, where 12,000+ millionaires, CEO’s and high-performing entrepreneurs read the #1 financial newsletter on Substack, providing you with weekly insights on the stock market and tips you can’t find anywhere else.
Happy Tuesday and Happy New Year!
Let’s start the week off strong.
The agenda for today:
👉 Indexes: 2023 was a great year
👉 Interest rates: heading for a “soft landing”
👉 Financial advisors: the good and the bad
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Weekly Market Update 🗒️💡
Indexes
The S&P finished the week 0.3% higher to end the year with a 24.2% gain, just short of new all-time highs.
The Dow gained 0.8% this past week and finished the year with a 13.7% gain, hitting new all-time highs in 2023.
The Nasdaq rose by 0.1% on the week and has risen 43.4% YTD for its best year since 2020.
Interest Rates
The Fed is signaling that it’s done with rate hikes and project rate cuts multiple times in 2024.
The 10-year Treasury yield fell to 3.9% from above 5% in October.
As rates fall and labor data continues to be strong, investors are going into 2024 more confident in a “soft landing” and possibly avoiding a recession altogether.
Nancy Tengler, CEO & CIO of Laffer Tengler Investments notes “The risk with the Fed is that they will either wait too long, or move too quickly. If they cut too soon, and we do see inflation resurge, that’s going to be bad news for everybody.”
Blackrock
Blackrock filed an amended version of the registration form for its iShares Bitcoin Trust ETF on Friday.
This is good news for crypto investors showing more evidence that a decision will come soon.
Many industry experts expect the funds to be approved in January.
Are you invested in crypto?
What do financial advisors actually do?
About 57% of high net-worth US investors are currently investing with a financial advisor, according to a Morgan Stanley survey.
But does that mean it’s the right move for you?
In today’s Profit Zone, we’re going to be covering what a financial advisor is, how they help you, what they typically charge, and if it’s worth having one.
Let’s dive in…
What is a financial advisor?
Financial advisors help you manage your finances.
In some cases, they will manage your money for you.
This includes
Investment managers - those who will manage your money on your behalf
Financial consultants - those who will give you advice on managing your money
Financial planners - those who will create a detailed plan and strategy for managing your money
Some financial advisors are lawyers or accountants who specialize in trusts and estates as well.
However, financial advisors don’t typically need the type of schooling a lawyer or accountant needs.
In fact, many don’t have any schooling at all and call themselves “financial advisors”, although not even qualified to give financial advice.
Then there are the ones who hold a certification (these will be different depending on where you live) that legally allow them to give financial advice.
This includes the Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC) and some may even hold a Chartered Financial Analyst (CFA) designation.
What do financial advisors do?
The services you get from a financial advisor will vary depending on your current situation, however, financial advisors will assess your financial position, including your assets, debts, and expenses, and help you highlight any areas you can improve on.
Typically their services involve the following:
Help you start an emergency fund that is suitable for your financial situation.
Aid in creating a budget.
Financial planning to meet short-term/long-term goals.
Retirement planning.
Tax planning to help you minimize your tax burden.
Explaining complex financial topics you may not understand.
Identifying an effective asset allocation or portfolio mix to reach your goals.
Help with paying off debt.
Help with putting together a Will.
Types of Financial Advisors
There are 3 main types of financial advisors:
Human advisors
People who will manage your money and provide the above services for a fee (keep reading to learn more about how advisors charge fees).
Human advisors typically cost more and sometimes have minimum investment requirements.
However, you get the relationship and human interaction, and sometimes for investors that interaction with someone you can trust is worth the cost.
Robo-advisors
An automated low-cost advisor that will manage your money for you, without human interaction.
Your first interaction will likely be a questionnaire of some sort.
Asking personal questions like your annual income, your investing preferences, time horizon, risk tolerance, etc.
Based on your inputs, the robo advisor will recommend an investment portfolio using its algorithm that suits you best.
This service will likely come with ongoing investment management and portfolio rebalancing, which is all automated.
Online financial planning services
A hybrid of human and robo advisors.
Typically more expensive than a robo advisor but less expensive than a human advisor.
You should consider this route if you want to work with a human but don’t mind meeting an advisor over the phone or through a video call.