Your financial planner might help to make some profits, but he is not a prophet and cannot control the market.
When you choose a doctor to give you medical advice, you feel he has the tools to help you because:
- He is more familiar with medical issues than you are.
- He is able to control certain aspects of your medical situation.
- He spends more time thinking about health care than you do.
- He seems to know what he’s talking about.
Of course, you should always turn to doctors to help you with medical care. However, that does not mean that they can always control the outcome of their advice. They may be familiar with medicines and able to operate in a way that can fix some of the symptoms. They usually keep up to date with all the various medical journals and publications. But at the end of the day, they are just suggesting reasonable medical procedures to help you, the patient, make educated choices.
Just like a doctor cannot prescribe medication and watch the patient live an everlasting healthy life, financial advisors cannot look into a crystal ball and control the outcome of the investments that they suggest. Some clients look to their financial advisors and say, “As you’re very good with numbers and you spend all day with the stock market, you should be able to pick the winners and avoid the losers.” But responsible money management cannot guarantee any specific return. The only thing an advisor can do is to ask many questions about your particular situation, goals, and risk tolerance, and recommend the most appropriate investments based on a variety of factors. A good advisor, like a good doctor, takes a complete history and educates the patients/clients to care for themselves. Your financial advisor should explain the risks of your investment choices, work with you to develop a financial plan, service your account, help you set reasonable Credit: Image: vichie81 / FreeDigitalPhotos.netgoals, and point out any issues that may come up.
So how do financial advisors control the stock market? The same way surgeons control the outcome of the operations: they don’t. And if you ever meet a financial advisor who says that he can, watch out - he might be another alchemist selling placebos.
For more information on choosing a financial advisor, read Three Reasons To Choose a CFP to Guide You Through the Financial Planning Process.
Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.