Why I Need an Advisor

Wendy Cook

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Hire an advisor or do it yourself? If ever there were a promising candidate for a DIY approach, it would be me.

That hasn’t always been the case. When I embarked on my investment journey in 1990, I was a typical investor about to enjoy a tech-boom-fueled run in the markets. Then, in 1998, I accepted a position at Buckingham Asset Management, where I was introduced to a new way of investing. I’d written about healthcare, libraries and pet-care products. Why not finance? I knew as much about investing as the next person.

Which is to say, I knew nothing.

In what turned out to be one of the luckiest breaks in my life, I heeded the advice of my new employers and shifted my scattered stocks into a portfolio of Dimensional Fund Advisors funds. I didn’t really know why, but to be a team player, I took a leap of faith.

Then that tech bubble burst and, boy, did I learn fast how lucky I’d been to have placed my blind faith where I did. Not only did I happen to sell at the height of the bubble, but I was relatively protected when it blew up. Plus, I got to do some tax-loss harvesting, so I paid almost no gains on the transformation. Suffice it to say, I’ve never looked back.

Since then, I’ve learned a lot more about the whys and wherefores of my actions. What began as beginner’s luck has matured over the years into the deepest appreciation for the science and wisdom of evidence-based investing. From my personal experience as well as the many tales I’ve been privy to in my day job, I know that, compared to any other strategy … well, there is no comparison.

Let me explain what I mean by the term “evidence-based investing.” Any term defining any investment strategy is subject to variations on the theme, and evidence-based investing is no exception. But in the 1,300-member Evidence-Based Advisors LinkedIn group (which I have volunteered to co-administer), we define it as follows:

Our [Evidence-Based Advisors] group is optimized for discussions among investment advisers who share a belief in the evidence that market-timing and security selection in relatively efficient markets are not expected to benefit investors after costs. Instead, investors are best served with efficient, low-cost portfolios that: (1) reflect their personal financial goals; (2) expose them to globally diversified sources of persistent market returns (such as asset class and/or factor exposure); and (3) help them manage their damaging behavioral biases.

So, these days, I have a deeper understanding of the science of investing and more disciplined decision-making capabilities. I’ve also seen the intricacies of portfolio management first-hand and have sufficient working knowledge to go DIY if I had to – especially with today’s automated robo-advisor services to help with the heavy lifting.

Still, I won’t do that.

In fact, the more I learn about investing, the more comfortable I am paying for the advice that I know I still need. Here are a few reasons even a sharpshooter like me still needs an advisor:

My brain

Knowing about my behavioral biases doesn’t immunize me against them. When the financial you-know-what hits the fan, I value having an evidence-based advisor as my dependable sounding board to confirm that I’m remaining rational … or to let me know if I’m not.