We believe it’s critically important to understand the price you pay, to know what you own and to understand why it’s important.

CERTIFITED FINANCIAL PLANNER

In the case of a full-service financial advisor, many focus on goals and objectives that take time, planning and ongoing coordination to accomplish.  If a financial advisor is a Certified Financial Planner®, they must  meet every requirement of the CFP board. To begin, a candidate must have 6,000 hours of professional experience or 4,000 hours of apprentice experience. The exam process can take up to seven years to complete. The exam spans over two days of testing. In 2018, the pass rate on the exam was 60%. It’s interesting to think that prior to 2013, the airline industry only required 250 hours of experience to fly a plane when the Certified Financial Planning board requires 24 times that amount to sit for their exam. Boeing is in the hot seat right now with the FAA and others to try to come up with best practices in order to prevent further 737 Max critical failures.  Planning is a complex and specialized experience personalized for the individual. The following topics cover the various areas of planning:

How many hours of meetings, preparation and follow-up would it take to cover these topics appropriately?  How could a company offer this for free? More importantly, what is the cost of not  instituting an appropriate plan?  In this regard, we believe a financial advisor is priceless.

KNOW WHAT YOU OWN

It’s important to know what you are getting for the price you pay. In the investment world, many investors are buying low-cost investment solutions to save money on fees.

But before we get teased by free, there are a lot of    questions that must be answered when it comes to investing …

  • Do investors understand what they own?
  • How much risk is in the investment they own?
  • What is the return expectation?

It may be fair to say that many investors don’t completely understand the amount of risk they are  taking during given points in the market cycle. From December 2007 to December 2018, investors withdrew more money from U.S. stock mutual funds than they put in.  All the while, a hypothetical $100 constantly invested in the Russell 3000® Index more than doubled in value.  We always say if you’re going to pick a rule to live by…..”Save aggressively, often, and simply invest it in the market (S&P 500 index fund with a dividend return).

Quite Making Excuses!

Quite Starting Over at the Beginning!

And those who chose to stay in cash during that period would have missed a cumulative return of more than 200%, based on the Russell 3000® Index. You can visually see a pattern of investors buying high and selling low. These mistakes can be very costly over time.  We argue that a financial advisor can save people from themselves.

UNDERSTAND WHY IT’S IMPORTANT

In Malcolm Gladwell’s book “Outliers,” he dedicates a chapter to what researchers have come to identify as the 10,000 hour rule. The rule states that for an individual to achieve a level of mastery,  they must dedicate 10,000 hours of practice to the subject. To put 10,000 hours into perspective, most people only work 2,000 hours year. So, any professional working in a field for more than five years would be considered a qualified expert. In my mind, five years isn’t a lot of time—however, many investors are taking on the responsibility themselves with little to no experience.  Heck, even Wilt Chamberlain used to say that when he practiced only one new defensive move it would take him about a year to make it his own.

And when it comes to delivering value, we see that planning, managing investor behavior and helping clients keep more of their after-tax wealth are key ways advisors are able to contribute value. We believe wise advisors educate investors on understanding the products and services they receive for the price they pay. We also believe it’s important for investors to understand the value they are receiving and the process you’re providing in helping them achieve their outcomes.

I’ve learned that goods and services are priced a certain way for a reason. The most important thing to discover is WHY they’re priced that way. Sometimes, a bad purchase based on price is a learning experience. However, some bad decisions based on the price of a good or a service can leave irreparable damage that cannot be undone. Let’s take a look at our own financial expenditures in 2020 together and see where we can maximize a return on our Net Worth.

 

Blake Parrish, CFP®
Senior VP, Portfolio Manager
Phone: (503) 619-7237
E-mail: blake@bpfinancialassoc.com

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”