The True Role Of An Investment Adviser

We all know the things that are good for us, like a healthy diet, exercise and plenty of rest. Knowing is easy; doing is hard. The same truth goes for investing. People procrastinate even when they know what’s good for them. It’s why investment advisers exist. We do the heavy lifting for you.

I’ve been promoting the benefits of low-cost index funds for two decades. This includes writing six books, several whitepapers, and countless articles. I’ve also spoken at dozens of investment conferences expounding on the virtues of passive investing.

I also own an investment company that charges people an annual fee to create and manage their index fund portfolios. My firm currently manages $1.2 billion in assets for 600 families nationwide.

The number of clients we help seems to surprise some do-it-yourself (DIY) investors. The most frequent question I am asked is, “Why would anyone pay you to manage an index fund portfolio?”

Talking with people about the benefits of index funds is easy; getting them to invest this way is often very hard. Procrastination is the biggest detriment to investing in index funds.

I respond by explaining the true role of an adviser. The true role of an adviser isn’t known to most people, even to most advisers. They don’t exist to pick winning stocks, bonds or mutual funds; they don’t exist to forecast the future of global markets and make tactical asset allocation shifts; and they certainly don’t exist to impress clients with their knowledge of industry acronyms. Advisers exist to get a client on a simple plan and keep them on track.

There are other reasons to hire an adviser even if you’re an index believer. Here is a partial list:

  1. To put space between you and your investments so that you don’t make emotional decisions.
  2. To do detailed research on asset allocation or index funds because you would rather spend time doing more enjoyable things.
  3. To provide help to a spouse or family member who isn’t inclined to do it on their own.
  4. To provide help to a spouse or family member when you’re no longer able.
  5. For legal purposes to reduce your fiduciary responsibility such as a charitable trust account.

I’m a firm believer in do-it-yourself investing and encourage people to try. I also know that a lot of folks have a lot of reasons of why they won’t ever get it done (or done right). For those people, there’s a lot to be said for hiring an adviser.