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A long-term financial plan requires frequent oversight and adjustments as the global market continues to evolve.
A long-term financial plan requires frequent oversight and adjustments as the global market continues to evolve. Pexels

Some people tend to attach emotions to money, especially when investing life savings in assets that share a correlation with the economy and market conditions. Fear of losing money or gauging high capital gains in combination with financial unawareness could become dangerous when you take a DIY approach in investing.

If you invest in stocks, bonds, or mutual funds through a 401(k) when planning for retirement, for instance, you need to understand that the market dynamics follow a cyclical nature where your money will lose and gain value from time to time with good chances of making decent profits over decades.

It may be hard to watch your life savings dip, though. This is what happened during the peak of the pandemic-induced market crash, where the average 401(k) tanked to $91,000. When this happens, you might be compelled to make impulsive emotional money moves by selling stocks at record-lows and buying those shooting up. However, you could lose money this way. Furthermore, a percentage of 401(k) account holders broke their egg nest that could drastically change the retirement timeline in their minds.

While choosing the right stocks does make a difference, even good stocks face value drops during full-blown recessions when the whole market is in shambles. So, when decent stocks drop in value, you need to understand that you have lost money on paper, which is basically unrealized losses. Secondly, when you are backing stocks with long-term growth potential, you shouldn't be too concerned by momentary dips since they are an inevitable part of investing in the stock market.

Assets like real estate, though considered comparatively stable, also depreciate in value and rents. The commercial real estate sector is still navigating an uneven recovery following a harrowing year where businesses shut down, offices were left empty, and retail was closed until it was safe enough to venture out. On the other hand, though, sectors like apartment building, single-family rentals, cold storage units, and the industrial sector have witnessed massive gains.

Over the last year, people have finally started to acknowledge the importance of financial awareness. The skyrocketing demand for financial resources and advice, which is unique to every individual, led to the massive popularity of robo-advisors. These algorithm-driven entities often powered by artificial intelligence can take input in the form of your retirement timeline, risk appetite, maximum possible contributions you can make, and several other factors to help pick stocks and manage your existing investments by keeping your portfolio within the assigned asset allocation.

Can Robo Advisors Replace Human Financial Advisors?

Robo-advisors are essentially mega repositories of market information optimized by cutting-edge machine learning and AI. They can efficiently pick investment options, allocate them in percentages that suit the client, and even make investment decisions on their behalf. Through automation, they are also able to reduce the cost of seeking financial knowledge and make hands-off investment management easy.

At the same time, these online platforms offer intuitive dashboards that compile all investment details in one place for you to track and make changes if needed. Robo-advisors are the product of state-of-the-art tech and the insights of experienced financial advisors who generally have an oversight on all investment moves. While they make managing portfolios easy and transparent at a low cost, though, there may be several situations where a robo-advisor might still fall short.

Although these digital entities continue to evolve with more data and input from investors, they cannot keep emotions out of the investors' minds or help them refrain from making emotional or impulsive investment choices.

An in-house financial advisor that is right for you will base the client-advisor relationship on communication since talking about money isn't an easy ordeal in the first place. They will attempt to create a safe environment to understand your spending habits, taxes, how money affects you, current household situation, healthcare costs, and long-term investment goals to understand your risk appetite and chalk out a long and detailed investment plan while helping you understand the motive behind each recommended investment option.

Certified financial planners (CFPs) undergo 1,000 hours of coursework where they are also trained to help clients keep emotions out of the equation when planning finances. They do this while educating them of the same for an ethical approach based on transparency. Recently, the CFP board introduced the Psychology of Financial Planning in their coursework to understand the sources of money conflict in clients, their attitude and biases, as well as ways to adapt to severe events that lead to financial crises.

The global economy is evolving at a fast rate, and while robo-advisors might help when it comes to managing small- to medium-sized portfolios, it is difficult to say if they can understand your fears or plan for a completely different course of action in times of crisis, especially when it concerns your life savings. In these situations, an in-house financial advisor might be able to objectively view the situation and recommend investment decisions that you won't regret later on.

How to Find a Financial Advisor Who'll Work to Find Best Possible Investment Options for You

In-house financial advisors follow a rigorous training program and often pursue additional courses to specialize in particular fields that revolve around taxes, estate management, investment or retirement planning.

One way to narrow down your search would be to look for in-house financial advisors with the Certified Financial Fiduciary (CFF) certification, which requires them to legally and ethically recommend the best possible investments for your goals and financial profile. The CFF certification is awarded by the National Association of Certified Financial Fiduciaries (NACFF).

Financial advisors follow either fiduciary standards or suitability standards. While the former requires them to legally find the best investments possible, those following the suitability standards are required to find investments that simply suit your profile but aren't necessarily the best ones.

While trusted friends and family could help you connect with their advisors, checking out advisor details on the Securities and Exchange Commission's Investment Adviser Public Disclosure website might expedite the process and offer more information.

Another way to match with nearby fiduciary advisors within minutes would be the cutting-edge online platform offered by the billion-dollar fintech company, SmartAsset. This New-York based platform helps over 65 million people each month with financial insights, award-winning financial tools, and proprietary financial simulation modeling software that cover the entire spectrum of personal finance.

Their specialty lies with a dedicated concierge team that matches you with up to three fiduciary advisors based on a short online quiz that revolves around your retirement goals and aspirations. The process filters out advisors to match your long-term plans, and you may interview all of them to find out if they understand your true financial aspirations.

Click here to match with a fiduciary advisor today.