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Financial Planning Insights from Bob Dockendorff JD, LL.M



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Do Financial Advisors Add Value to Investments? Yes, But Not How You Might Think

Don't Freak Out About Investments

A few studies have examined the value of financial advisors, from an investment standpoint. They all seem to conclude the same thing—that the value of a financial advisor is not in finding the best investments but, rather, designing a basic, workable plan, and more importantly, serving as an accountability partner and barrier from making a big emotional mistake. 

I often hear, “Why would I pay 1% for something I can do much cheaper on Vanguard, Fidelity or some other cheap platform?” 

This is a totally valid question. Can’t you just build your own ETF portfolio and save thousands of dollars per year? 

 - Dilbert by Scott Adams

It turns out that, despite knowing what to do, very few people consistently stick with the plan of buying and holding boring investments for the long term. 

Early in my career a wealthy client told me “Managing money is simple, but managing YOUR OWN money is very difficult.” 

This, it turns out, is very true. Many folks know what to do, but they don’t actually do it. Market volatility causes emotion, and emotion causes behavioral investment mistakes. 

“The world is ending, sell everything!”

“This market will never stop, let's borrow money and invest!”

Think about the weight loss analogy. Weight loss requires exhausting more calories than one consumes. It’s simple, but not easy, and that’s why very few people execute on their weight loss plans. 

Maybe they do well for a week or two, but motivation wains after a few weeks, temptation takes over, and then it’s back to living without a plan. Meanwhile, hucksters make millions on fad diets. Have you tried green weight loss tea? 

But what If I’m really disciplined about my investments and savings? 

Good for you. Take a hike. 

Seriously, though, there are those people that are disciplined enough to buy an index fund and forget it exists or wake up every day at 5am to hit the gym, or keep all their sweaters perfectly ironed, pressed and folded in a clean cedar closet. 

Are you one of those people? Probably not. 

Most people get distracted about work, their family or Jim Kramer’s hot stock tips. Soon, emotional decisions and bad consequences follow.  

Unlike scarfing a bacon cheeseburger after months of dieting (which is a delicious mistake), there is no real lasting negative impact from that one slip up. 

Selling an index fund to invest in your friend’s, sister’s pharmaceutical microcap can ruin years of savings and portfolio gain. 

Good investment advisors will make sure you never do this. They’ll also make sure that your portfolio is:

1.    Capable of meeting long term goals

2.    Suitable for your risk tolerance and capacity

3.    Tax optimized

4.    Cost managed

Knowing what you should do, and actually doing it, are two very different things. If you’re lacking an investment plan, or having trouble sticking to one, snag an accountability partner for the long term. 

Additionally, be very weary of anyone that presents their value proposition as "knowing the best managers" or "having some good stock ideas".

 

 

 

Disclosure: Claro Advisors LLC ("Claro") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Claro and it's representatives are properly licensed or exempt from licensure.   

Past performance shown is not indicative of future results, which could differ substantially.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. 

 

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About the Author

Robert E. Dockendorff, JD, LL.M

Robert E. Dockendorff, JD, LL.M

Robert Dockendorff is a Vice President of Claro Advisors, LLC. Bob serves as an Advisor at Claro, where he helps clients achieve financial goals through careful analysis and the development of long-term plans that encourage consistent, achievable actions. Bob also enjoys sharing helpful financial planning insights on his blog and is an active contributor on Investopedia's Advisor Insights website.

Prior to joining Claro, Bob was a Senior Associate Financial Counselor at The Colony Group, supporting a team of financial counselors with research and analysis on all areas of wealth management and financial planning for high net worth individuals. He also focused on the implementation of investment, estate, and tax planning tailored to the specific goals of diverse clients. Prior to joining The Colony Group, Bob worked as a Tax Associate at the international accounting firm Ernst & Young, where he conducted tax research for multi-national businesses. Bob received a Bachelor of Arts in Philosophy from the University of Vermont. After college, Bob earned a Juris Doctor from Suffolk University Law School, Cum Laude, and an LL.M in Taxation from Boston University Law School. Bob has previously passed the FINRA Series 65 and the MA Life and Health Insurance Producer Exam. In his spare time, Bob enjoys the mountains, the beach, and playing golf. Bob resides in Hingham, MA with his wife Caitlin and two sons, Charlie and Tommy.

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Disclosure: Claro Advisors LLC ("Claro") is a Registered Investment Advisor with the U.S. Securities and Exchange Commission ("SEC") based in the Commonwealth of Massachusetts. Registration of an Investment Advisor does not imply any specific level of skill or training. Information contained herein is for educational purposes only and is not to be considered investment advice. Claro provides individualized advice only after obtaining all necessary background information from a client. This report is not a financial plan and is not intended as a solicitation or advice to purchase specific investments, but the information provided can assist you in evaluating your current financial situation and your ability to achieve your investment goals. Any projection of investment outcomes is hypothetical in nature, does not reflect actual investment results, and is not a guarantee of future results. Similarly, other information regarding various investment outcomes are hypothetical in nature, do not reflect actual results and are not guarantees of future results. The projections may not include all taxes applicable to your situation. Past performance is no assurance of future results. Investments may fluctuate and lose value, and unexpected market movements may result in changes in rates of return and anticipated performance. Claro does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation. Claro will provide all prospective clients with a copy of our current Form ADV, Part 2 ("Brochure") prior to commencing an Advisory relationship. Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or toll free at 800-604-2838 with any questions.

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