Who Is Your Financial Mentor?

One of the major obstacles to financial investment for many people may be intimidation. The idea of placing your money into an investment can certainly be intimidating, especially for those who might feel less-than-informed about financial matters. There is no reason to be intimidated if you have sought out a mentor for your financial life. Having mentorship from a financial professional can be of incredible value for you as an investor, helping you shape a financial strategy that will assist you in pursuing your goals.

What’s the value of financial mentorship?

The value can be seen in three key services that a mentor may provide: portfolio construction, wealth management and behavioral coaching. Financial mentorship may provide the most benefit through these aspects of the relationship.¹

Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

Financial professionals acting as mentors can use their insight to guide clients away from poor decisions, such as accepting excessive risk in a portfolio. Indeed, the greatest value of a financial professional may be in helping individuals adhere to an agreed-upon financial and investment strategy.

What kind of role can a financial mentor play for an investor?

The answer: a very important one. Although the value of such a relationship is hard to quantify, the intangible benefits may be significant and long-lasting.²

Certain investors turn to a financial mentor with one goal in mind: the “alpha” objective of beating the market, quarter after quarter. Even Wall Street money managers fail at that task—and they fail routinely.

At some point, these investors realize that their financial mentor has no control over what happens in the market. They come to understand the real value of the relationship, which is about strategy, coaching, and understanding.

A good financial professional can help an investor interpret today’s financial climate, determine objectives and assess progress toward those objectives. Alone, an investor may be challenged to effectively do any of this. Moreover, an uncoached investor may make self-defeating decisions. Today’s steady stream of instant information can prompt emotional behavior and blunders.

Staying on track

A good financial mentor helps an investor commit to staying on track. Through subtle or overt coaching, the investor learns to take short-term ups and downs in stride and focus on the long term. A strategy is put in place, based on a defined investment policy and target asset allocations with an eye on major financial goals. The client’s best interest is paramount.³

As the investor–mentor relationship unfolds, the investor notices the intangible ways the mentor provides value. Insight and knowledge inform investment selection and portfolio construction. The professional explains the subtleties of investment classes and how potential risk often relates to potential reward.

Perhaps most importantly, the professional helps the client get past the “noise” and “buzz” of the financial markets to see what is really important to his or her financial life.

The investor gains a new level of understanding—a context for all the investing and saving. The effort to build wealth and retire well is not merely focused on “success” but also on significance.

This is the value a financial mentor brings to the table. You cannot quantify it in dollar terms, but you can certainly appreciate it over time. The education this mentor provides is invaluable and can serve you throughout your career as an investor.