Everyone needs to manage their wealth, taxes, and estate properly. Understanding the risk involved with your investments eliminates any surprises regarding performance. Investors are upset if their investments decline in value, but they are more upset when these funds decline and they didn't think they could or should have. Misunderstandings and miscommunicated objectives lead to unwelcome surprises. Many of the events we don't think can happen, do. The year 2008 is an excellent example. By having professionals manage the ever-changing legislative environment, you will avoid honest mistakes. When it comes to estates, taxes, and investments, even the honest mistakes will cost you.

No one because information is available and structures in place for people to manage their own wealth if they have the propensity, capability, and desire to do so. Unfortunately, the people who either manage their wealth halfheartedly orbelieve they possess the knowledge and skill that they don’t, usually have the most problems managing their assets and taxes.

“Successful Investor" published by the investment company Davis Funds in December of 2006 took a look at the difference between the funds' performance, known as fund return, and the investors who were in the fund performance i.e. individual investor return.

“Maintaining a long-term investment strategy is far easier said than done, especially in the face of disappointing short-term results previously mentioned. When faced with such situations, most investors tend to engage in unhealthy investor behavior and may abandon their long-term investment strategies, chase the hot performing categories or try to time the market in some fashion.”

“The impact of engaging in such unhealthy investor behavior is illustrated quite strikingly in the study results below. The study shows that while the average stock fund delivered an average annual return of 11.3% per year from 1986 to 2005, the average stock fund investor received an average annualized return of only 3.9% per year.”

In short, anyone who does not have the ability or desire to give proper wealth management the attention it demands should work with a financial advisor.

The term financial advisor means a lot of different things and there are a lot of different places where people can display this title with lots of different ways of doing the job. With little regulation to monitor who gets into the business and little regulation about who carries what title, the responsibility of understanding whether or not a financial advisor is right for you is your responsibility. While making a decision based on relationship is recommended, it can’t be the only factor considered when it comes to your wealth. Relationship is important, but competency is paramount.

• Pick an advisor with tenure and who is beyond the “building their practice” stage, as it will minimize some of the distractions that keep advisors fromfocusing on what you are paying them to do.
• Ask good questions and understand how the advisor is motivated and evaluated. Is it all about bringing in new clients or about servicing the ones they have?
• Really press about how they implement. Many advisors talk a lot about what they can and will do. It is the client’s responsibility to ask them how.For example, if an advisor's sell discipline on a stock is that if a stock drops 15% it should be sold, the client should inquire about how they actually does that. Do they call all their clients individually? Can they hit a button and it happens across the board? This is called discretion. Generally advisors who have discretion need less time to change direction and can capitalize on opportunities. Advisors who do not have discretion need to wait on return phone calls and understanding of their clients. This process can lead to inaction as the workload involved with a change can discourage change itself. Not to say that change is always necessary, but it is inevitable.Advisors excel at explaining what they do, but you have to dig a little to get specifics about how they implement.