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“Investing is easy. Why do I need you?” When the stock market does well, it might appear the financial advisor is merely a middleman. Eliminating the middleman makes sense, doesn’t it? The financial advisor is a professional, trained to give advice. Let us look at ten situations when paying for professional advice makes more sense than going it alone.
1. Accountants. Individuals primarily work with accountants when filing their personal tax returns. It is easy to file your Federal and State tax return online. Why should you pay for advice?
Rationale: Accounting is a complex subject. Many people have different situations. A simple filing might pay what the government is asking for, yet working with an accountant might have you paying what you owe, which can be a lower number.
2. Lawyers. You can represent yourself in court. Few people would. Why? Because many prosecutors bring cases to court when they are confident of getting a conviction. Would you want to stand up alone against that?
Rationale: Your lawyer brings a wealth of knowledge. They know about similar cases and precedents. They can present an alternative explanation; in the hope the jury will have reasonable doubt.
3. Auto mechanics. You can do simple auto repairs in your driveway. You can buy books on the subject. Auto mechanics have a bad reputation, especially on TV.
Rationale: Service is often included for the first couple of years when you buy a car. Many of the functions of a car are guided by electronics. Those need an expert. Cars are heavy and most pieces of them are heavy. You need someone with the right equipment.
4. Personal trainers. Many people want to slim down or bulk up. They work out on their own. but see very little if any change in their appearance. They can lose interest easily. They can also injure themselves.
Rationale: The trainer gets you onto a schedule. You show up because you know they are waiting for you. They vary your routine to keep it interesting. They help you maintain your form, to exercise your muscles properly.
5. Diet programs. Anyone can starve themselves to lose weight. They can undertake diet programs that work fine at home, but do not transition into social situations. People lose interest or eat more than they should.
Rationale: An organized diet program gets you into a routine. Group settings build a sense of community. You are taught practical lessons like how to enjoy yourself at parties while sticking to your routine.
6. Family doctors. There is plenty of medical advice available on the Internet. A lot of it can scare you. You do not know the qualifications of the person giving you advice or the contents of the wonder drug medication they are touting.
Rationale: This professional might have trained for 15 years! They have access to data you might not, like blood test results. They have experience and access to specialists. They know more than you can learn.
7. Sports coaches. You might have natural ability, but it needs to be developed to the professional level.
Rationale: Olympic athletes have professional coaches. Enough said.
8. Home repairs. You might be able to replace a faucet or run conduit cable for electrical outlets. You are also creating a potentially dangerous situation if you do it wrong.
Rationale: Electricians and plumbers are licensed professionals. They usually carry insurance. In certain townships the work done must be signed off my an inspector.
9. Barbers. You could cut your own hair, but it would be difficult. It might be easier to cut your partner’s hair. Hair grows, but not as fast as you would like, if you make a mistake.
Rationale: You have heard the expression “bad haircut.” A professional can learn what you like and suggest hairstyles that compliment your face. They also know new styles.
10. Travel agents. Once upon a time, people booked flights through travel agents. Today, hardly anyone does. Why would anyone use a travel agent today?
Rationale: The profession moved upmarket. You might not book a flight through a travel agent, but you would book a safari. Fees are often built into the vacation’s price. If something goes wrong, you call your travel agent to sort out the problem.
11. Insurance agents. You can buy life insurance online. You can buy term insurance at banks. Your job might provide life insurance. Why do you need an insurance agent?
Rationale: Insurance is a complicated product area. There are many types of insurance. There may be risks you did not know you can insure. Insurance agents know what is covered and not covered in individual policies. Imagine paying for an insurance policy for years and the moment you try to claim, you discover you were not covered for that situation.
12. Financial advisors. Investing seems easy when it appears most stocks are going up. If you know what you want to buy, why do you need a financial advisor?
Rationale: Placing buy and sell orders in only a small part of an advisor’s job. Financial planning is a major component along with adopting a strategy consistent with a client’s risk tolerance. Investors often act on emotion, meaning they sell or buy at inopportune times. A financial advisor can help keep them focused on the long-term, big picture in volatile markets.
Many professionals add value for a price. Some are obvious. Others create “aha” moments in the prospect’s mind.