A Financial Advisor's Role Goes Beyond Managing Your Portfolio

Matthew Cuplin |

I tell people all the time that saying your title is "financial advisor" is about as generic as saying you're a doctor. Are you a heart surgeon, a chiropractor or a college professor? Those professionals may all use the title "doctor," but I'm not sure you want a university professor performing a kidney transplant on you.

In the same vein, people in the financial services world all too often use the title "financial advisor" or "financial planner" when a more appropriate term might be "financial professional" — if advice and planning are secondary to what they do to help the people with whom they interact.

What a financial advisor can, and should, be is a trusted individual who develops a plan to help you and your family achieve your personal goals and dreams. A portfolio alone is not a plan. A plan is something that goes beyond your portfolio and can only be crafted by a planning-focused professional. It should be written down and updated regularly.

These days, access to information is fairly unencumbered. That's not to say all the information you can receive is good, credible or even accurate — but you have access to it. Therefore, the ability to "do it yourself" when it comes to planning your finances and future arguably has never been easier. It's also never been easier to make key and potentially monumental mistakes because of that.

Technology is also readily accessible. Because of that, you can in a matter of minutes go online and use a "robo-advisor" to help you select a well-diversified portfolio at low costs.

So if you have all the info you need at your fingertips, and you have ample technology to assist you as well, what is the need for an advisor? It depends on what that person brings to the table for you. If their value is only portfolio construction and not a plan, I'd argue that their value is continuing to diminish by the day. But that is the bare minimum of what a financial advisor can and should be doing for you.

The value of working with an advisor is found in the quality and breadth of the planning they provide you. Some of an advisor's more common roles include:

• Developing and updating your financial plan.

• Understanding taxation laws and changes.

• Planning for income strategies in up/down/flat economic markets.

• Making sure you understand your Social Security and insurance options.

• Ensuring your money is working hard enough to outlive you.

• Fighting off inflation from eroding your purchasing power.

• Implementing charitable gifting strategies.

• Making sure your estate safely transfers to your loved ones.

But maybe most critical to your success is something that often goes largely overlooked: behavioral management. This involves making sure you stick to your financial plan even when things get tough, such as when the people around you are scared that "this time it's different" and begin to abandon ship on their portfolios and long-term planning for fear of what will only be a short-term disruption. There is no specific monetary value you can place on behavioral management when that moment arrives. And we know that moment will, because market corrections and drops (sometimes big ones) happen every year. They are only temporary, but when the media and your emotions tell you to "run," your advisor should be there reminding you to trust the plan.

Behavioral coaching is an essential part of a true financial advisor's day-to-day work and a large part of the value clients pay them for. If investment selection can be seen as a commoditized skill and can be done by a robot online, than behavioral management is its antithesis. The human touch, proactive contact, reassurance and planning are all qualities of a good financial advisor and are why the advisor's role is more important today than it has ever been. It's also why you should strive to find a financial advisor that fulfills that role for you.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.