What’s Your Investor Mindset?

September 8, 2015
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64% of Americans have no financial strategy at all. That’s right — no plan whatsoever to build wealth or to keep it. This finding comes from the National Consumer Survey on Personal Finance conducted by the Certified Financial Planner Board of Standards, Inc. Only 17% have a written financial plan that is updated regularly. Notably, 48% said they had benefited from having a written plan. So, congratulate yourself if you are in this group.

Why don’t more people have a financial plan? Some cited the expense of engaging a financial advisor; some said they get along just fine without a financial plan and others felt their finances weren’t complicated enough to warrant one. Others were hazy about financial services industry qualifications and 40% of respondents had no idea that there were professional credentials or designations for financial advisors. Investment and financial decisions are difficult to make for most people. Not only does it take a lot of time, the knowledge required can seem like learning a second language child’s play. There are basically three types of investor mindsets and you may have known or even been one of them.

Do-It-Yourself
The Do-It-Yourself investor believes that they possess the knowledge needed to actively manage their investments. They also have the time required to research among the thousands of investment opportunities, build an effective portfolio of securities and can monitor performance on a regular basis. They may do all of their own financial planning and manage their accounts through an online portal while paying transaction fees.

Collaborator
This type of investor likes to be involved in the investment decision-making process, however seeks the advice and expertise of a financial advisor to validate their decisions. Clients typically pay fees in the form of commissions on transactions or a fee based on the value of their assets that are wrapped into a single investment solution. Financial planning may be limited or non-existent and each investment decision must be approved in advance by the investor.

Delegator
Finally, there are investors who prefer to delegate. These investors don’t have the interest, time or desire to be involved in the day-to-day investment management decisions of their portfolios and are willing to delegate financial decision making to a trusted advisor. In addition, clients are typically offered a comprehensive set of financial planning that then drives the investment decisions. Clients typically pay a fee based on the value of the assets professionally managed.

Someone who is a delegator will usually work with an independent RIA (Registered Investment Advisor) who holds a Fiduciary duty to place the needs of the client first. Sometimes an investor may mistakenly believe that a broker/advisor they work with are similarly held to this higher Fiduciary standard. This could lead to trouble for a delegator since they typically don’t take an active role in the investment decision-making process or truly understand the investments being recommended.

Which Type of Investor Mindset Do You Possess?
Investing without a financial plan is an enormous risk; investing with a financial plan that hasn’t been reviewed in several years is also chancy. A relationship with a trusted financial advisor can help bring you up to date about what you need to do, and provide you with more clarity and confidence when it comes to the financial future. Merely having a financial plan on paper doesn’t guarantee that you will reach your goals. Yet a financial plan does give you an understanding of your current financial situation, identify where you want to be and provides a path toward closing any gaps and achieving your important financial objectives.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage.

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