Five Reasons to work with a Financial Professional - May 2025 Learning Spotlight

Five Reasons to work with a Financial Professional - April 2025 Learning Spotlight | WT Wealth Management

Successful investing is as much about psychology and discipline as it is about understanding the complexities of financial markets. Working with an investment professional can help turn dreams into reality, provide essential safeguards for your portfolio, along with serving as a sounding board for your ideas.

Using a financial advisor often leads to better outcomes, including higher average investment returns.

Studies by Vanguard and Fidelity found that investor-advised portfolios outperformed by 3% and 1.8% per year, respectively, even after accounting for the costs of hiring an advisor. ⁽¹⁾

With this in mind, we’ve compiled a list of five key areas where an investment advisor can positively impact your overall financial plan.

Being Realistic About Returns

Having reasonable return expectations helps investors maintain perspective, especially during periods of market downturns and negative monthly returns. In a recent study, discussed on CNBC on March 12th, 2025 100 retail investors were asked about their “average” return expectations over the next five years, with an average response of 15%. In contrast, when 100 investment professionals were surveyed, their average expectation was only 7%.

Working with an investment advisor can provide valuable perspective, helping investors stay grounded during both market highs and lows.
Getting Distracted by Volatility

Many investors focus on short-term results rather than long-term goals. While this sentiment may sound like wisdom from Confucius, the reality is that most investors are more captivated by short-term trading trends than by building portfolios designed for long-term success.

Once again, working with an investment advisor can help you stay focused on the bigger picture rather than getting distracted by short-term market fluctuations.
Lack of Diversification

Again on CNBC a study discussed on March 12th, 2025 found that the average self-directed retail investor holds just 11 stocks, whereas the average professionally managed account includes 35 positions. Proper diversification helps reduce risk and improve overall portfolio stability.

There’s an old saying: “You should always hate part of your portfolio.”

In a well-diversified portfolio, some areas will perform well while others lag, and over time, these roles will reverse.

Most investment advisors have undergone thousands of hours of training and years of continuing education (CE), where fundamental principles like diversification are emphasized and reinforced.
Buying High and Selling Low

We've joked about this before, but self-directed investors often have an uncanny tendency to jump into a stock market rally late and sell after the first significant correction. Being late to the party and the last to leave is rarely a recipe for investment success.

In most cases, investment advisors prefer to put client money to work after a 15% market decline rather than after a 15% surge. Countless studies have shown that individual investors struggle to buy after a downturn but are all too eager to invest after a sharp rally.
Focusing Too Much on Taxes

I've never met an investor who enjoys sharing their gains with the government. However, taxes are an inevitable part of successful investing. Whether you're paying taxes on capital gains, dividends, or deferring them until post-retirement withdrawals in tax-advantaged accounts, tax management should complement— not dictate— your investment strategy.

At WT Wealth Management, we are highly tax-conscious and always mindful of the tax burden generated in taxable client accounts. Tax avoidance should never be the sole driver of an investment strategy.

The experienced team at WT Wealth Management is here to answer any questions you may have. Our objective is to provide a consultative environment in order to ensure your thoughts, opinions and beliefs are reflected in your portfolio while structuring your account to realize your overall investment goals.

The purpose of these Learning Spotlights is to educate, spark thoughtful discussions, and encourage meaningful dialogue with our clients.

WTWM has not independently reviewed the studies discussed by CNBC during the broadcast on March 12, 2025. The information referenced from that broadcast in this Learning Spotlight is for general informational purposes only. WT Wealth Management does not assume responsibility for any errors or misstatements from CNBC regarding the studies cited.

SOURCES

Financial Advisor vs. Self-Investing
SmartAsset.com

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Any opinions expressed on this website are the opinions of WT Wealth Management and its associates only. Material listed on this website is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. You should always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETF’s carry certain specific risks and part or all of your account value can be lost.

At WT Wealth Management we strongly suggest having a personal financial plan in place before making any investment decisions including understanding your personal risk tolerance and having clearly outlined investment objectives.

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