As you plan and save for retirement, there are many decisions to make. What asset allocation should you have in your portfolio? How much income should you plan for in retirement? And should you hire an adviser? While some questions may be easier than others, few investors really understand the true benefit of sound saving and retirement advice. In this article, we'll discuss how planning and financial advice may be able to help you toward your long-term goals.
In recent years, many retirees and investors have chosen to forego paying for retirement advice, deeming it too expensive. The thinking goes, you are able to simply put your money into the market and investing passively--often through investments like index-tracking ETFs--to achieve market-like returns over the long-run. This sounds like a great way to save money and grow your retirement finances. Unfortunately, few investors are able to stick with their long-term strategy. And this truism is what makes investment advice so crucial for your long-term financial health.
Many investors need long-term portfolio growth, even after they retire. When folks retire at age 65, they may well have 20, even 30 years, left for which to plan and save. That's a long time to be relying on savings for pension and other retirement income. You may have been told by other advisers that you should invest conservatively and potentially even buy more insurance once you retire to guarantee you'll have necessary income. But investing conservatively may not provide the investment growth necessary to help you provide the required retirement income you need over a potentially long time span.
This potential need for long-term investment growth means many investors likely need some exposure to stocks if they plan to draw retirement income from a portfolio other than their pensions. However, few people are able to invest in stocks long-term without making reactionary investing mistakes.
For example, American market research firm DALBAR, Inc.'s annual study compares stock and bond markets' and average US mutual fund investors' returns over the past 25 years. The study showed equity fund investors typically hold their mutual funds for an average of just 4 years.[i] According to the study, those stock fund investors had an annualised return of 6.8% versus the S&P 500's 9.1%.[ii] However, with sound financial planning and ongoing advice, investors may have a better chance of weathering short-term market volatility and reaching their long-term goals.
Going it alone after you retire can be tough, especially if you're unsure your plan is really the best plan for you. After all, you've been saving your whole life for this time. If you find yourself worried about finances or fretting big market swings, ongoing advice may help. It can also be increasingly important for the many retirees in need of holistic financial planning.
You may benefit from working with someone who can help you craft an ideal strategy and avoid making reactionary decisions that can detract from your long-term returns. While the costs of hiring an adviser if a visible and quantifiable cost, the alternative cost of potentially making investing mistakes is less apparent--though very real.
A good adviser should help you consider your long-term goals, cash flow needs, investment time horizon and more to craft your optimal long-term strategy. After all, the last thing you want to be doing in retirement is worrying about your financial standing and how to maintain your savings and continue generating income. An adviser may also be able to help you plan for cash flows, as well as other aspect of your holistic financial plan, such as taxes, insurance, pensions and more.
If you become choose to work with Fisher Investments Canada, you can hire our US-based parent company, Fisher Investments, to help craft an investment strategy for you and provide ongoing advice and planning. When you first become a Fisher Investments client, they get to know you to create a personalised portfolio tailored to your unique situation: your financial goals, wants, needs, health, family and lifestyle. Fisher Investments' Portfolio Evaluation Group takes this information to generate and recommend an asset allocation it thinks is best suited for your situation.
Clients of Fisher Investments also receive a dedicated point of contact, called an Investment Counselor. Your Investment Counselor knows you and calls you to make sure nothing has changed with your personal situation and to provide updates on Fisher Investments' market forecast. Investment Counselors' sole job is to help you stay on track with your investment plan. He or she calls you to make sure you understand any changes to the portfolio and why.
We believe this personalisation and focus on client education and service is what clients need to stay on track toward their long-term goals and enjoy life in the meantime. If you're interested in learning more, download one of Fisher Investments Canada's education guides today.
[i] Source: DALBAR, as of 10/06/2019. Quantitative Analysis of Investor Behavior based on an initial investment of $1 million (USD), US stocks are represented by the S&P 500 Index, 31/12/1993–31/12/2018. These figures shown in US dollars. Fluctuations between the US dollar and Canadian dollar may result in higher or lower investment returns, and other noted characteristics.
[ii] Ibid.
