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Business

Conte: The benefits of having a financial adviser on your side

William R. Conte
William R. Conte

In today’s complex and volatile markets, making sound investment and financial decisions is a challenge. Investing on your own can be complicated, overwhelming and risky.

In fact, studies have shown that self-directed investors often can be their own worst enemies, entering and exiting the market at inopportune times in reaction to market movements that make them uncomfortable or emotional.

Steps to successful investment

Successful investing involves fortitude and a focus on the long term. The first steps you can take toward minimizing the likelihood of costly mistakes are:

Understanding the emotional and behavioral factors that contribute to investor pitfalls:

• Psychology influences the choices investors make, such as how often they trade and how they make buy-sell decisions. Common psychological blind spots include:

• Overconfidence – assuming you know more than you do.

• Mental accounting – consciously or unconsciously dividing your wealth into separate buckets.

• Anchoring – fixating on past prices, such as what you paid for a particular stock.

• Loss aversion – putting more emphasis on avoiding losses.

Defining your goals and developing a plan – and an asset allocation – that helps you reach them:

Having a plan and sticking to it can help you avoid making emotional decisions.

Having the discipline to stay the course as markets fluctuate:

Some investors try to time the market by moving in and out of it. Professional advice can help keep you focused by taking emotions out of the equation.

Your financial life is more than just your investments.

Over the past few years, the proliferation of robo-advisers that provide digital financial advice based on algorithms has received significant buzz.

While robo advice offers a low-cost entry into investing, it also comes with little to no human intervention.

Instead, an asset allocation is generated from an investor’s answers to an online questionnaire. But, how you value money – and what you believe about money – cannot be captured or solved by mathematical rules or algorithms.

You want advice that connects with your thinking, experiences and beliefs around money.

If you’re deciding among traditional financial advisers or robo-advisers, consider the following:

• What is most important to you at this stage of your financial life?

• How confident are you in your financial knowledge?

• Are you able to take emotions out of your financial decision-making?

• What are the financial complexities that you currently face?

If there are complexities in your financial life – debt, children, employee benefits, major life events, estate and tax issues – you may want to consider choosing a traditional financial adviser who can help you customize a plan that is tailored to your specific situation.

And, keep in mind that reaching your goals often involves going beyond investment advice to include conversations about estate and wealth transfer planning, risk management and even your philanthropic aspirations.

By working with an experienced financial adviser, you can have the best of both worlds – the freedom to make your own investment and financial choices, but with the guidance of a professional who understands your unique needs, improving your chances of achieving your goals.

• William R. Conte is a wealth adviser in Joliet with Morgan Stanley Smith Barney. He can be reached by email at william.conte@morganstanley.com or by calling 815-729-8040. His website is www.fa.morganstanley.com/william.conte.

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