Taking your time can have a big impact

Ashleay: Welcome to the “In Your Interest!” podcast. My name is Ashleay and as usual, I am accompanied by my chief strategist colleague Sébastien Mc Mahon. And this week, we are back with Pablo Carrera, Regional Sales Director, to talk about the added value of financial advice. So, hello Pablo, thank you for sharing the mic with us this week.

Pablo: Thank you very much for having me back. It's a pleasure to be here.

Sébastien: Always a pleasure to have you, Pablo. And what better topic than talking about the value of financial advice?

Ashleay: Actually, Pablo, I was reading a striking statistic. It says that a household that has used the services of an advisor for over 15 years generally has 173% more assets than a household that has not received any advisory services. So, could you tell me more about the different approaches to achieving financial goals?

Pablo: Absolutely, yes. And by the way, that statistic is even more impressive when you realize the reason why these accompanied households have so much more in assets. And we'll get to that in a minute. But in terms of the different approaches, generally, you can divide them into basically two categories. You've got the people that prefer to self-manage or run their own investments, either through a brokerage account or others. And those people that tend to prefer to be accompanied. So, they'll have a financial advisor, they'll have a financial coach. And the idea behind those two, those are two very different approaches, but there are advantages and disadvantages to each one. Obviously, if you are managing your own money, if you are doing this yourself, you will have full latitude, you'll have full flexibility. You do as you please. These are your decisions. You also control, you have a much better control over the cost of managing your own money. You sometimes will have even wider choices of investments depending on which platform you're using. Obviously, full discretion as to the decisions that you make. There's also a certain psychological component where one could even say maybe some pride in the results that are achieved. Obviously, the results that are positive, you look at those and you say “Well, I did that. That comes from me. Those are my decisions.” So, there's a certain amount of pride. Obviously, as is the case with any coin, there's a flip side to the situation. There are some disadvantages. The main ones being: managing your own investments will require time. It'll require knowledge. Sometimes it requires tools, skills. Not everybody has those elements readily available, especially time. When you look at the analysis that leads to the decisions that you're making, if you're doing this on your own, you have no sounding board, you have no counterbalance to be able to run your ideas by and get a differing opinion that just isn't there. You're on your own. And the lack of information, that can be a negative.

Ashleay: Right!

Pablo: And the flip side of that – too much information – can also be a negative because you're sitting there, you're trying to assimilate all the research that you're doing, all the information that's readily available out there. And sometimes that leads to what we know as analysis paralysis, where you simply cannot get to a decision because there's too much information to sift through. These are the main advantages and disadvantages of doing this on your own.

Sébastien: And ultimately what you need is a plan. You need to have a plan. You need to have a target. You need to think about how to get there, thinking about the time horizon, what you want to accomplish with your finances over time. And even if you're – quote unquote – "sophisticated” as an investor, you still need all of this. Thus, likely, even if you're sophisticated, you need financial advice in your life.

Pablo: Absolutely, yes. And if you look at the people that choose to go that route – the route of being accompanied by a financial advisor – if we do the same analysis, right, the positives and negatives, definitely, when you're being accompanied, all of the disadvantages that we just spoke of, of doing this on your own, most of them go away. Because you have somebody in your corner that is able to help you with the analysis. You have somebody in your corner that is able to manage your own emotions. This is a big, big disadvantage when you're doing this on your own.

Sébastien: Very important.

Pablo: Investing is something that is inherently emotional because you're dealing with your own money.

Sébastien: We need to be balanced here. So, there are some costs or disadvantages of dealing with an advisor.

Pablo: Absolutely. Yes. When you when you choose to have somebody in your corner that is able to give you advice, yes, that will generally increase the cost. For some people, it will also take away that feeling of “I did it on my own.” Which is a shame, because when you think about the added value of having that advice; of having that person that you can bounce ideas off of, having that person that can accompany you through what I like to call sometimes “storms”, markets that that pull back, having somebody in your corner that can accompany you through those is definitely worth a small additional cost that you will pay for that security, for that added value of financial advice.

Sébastien: The thread here and the imagery that you've been using relates to a coach. You know, a financial advisor is not an oracle that will tell you: “Today buy this and tomorrow buy this sort of thing, and you'll be a millionaire in a few years!” It's just someone in your corner helping you formulate a plan, giving you feedback, keeping you on your game. So really, much like coach in sports.

Pablo: Absolutely. Yes. And that's actually an excellent point, because sometimes we are under the mistaken impression that the financial advisor is there only to provide the product that is going to be that magical product that gets that great return. That's not the job of the financial advisor. The financial advisor does not have a crystal ball, any more than we do, or any more than anyone else. The role of the financial advisor is to accompany. The role of the financial advisor is much like a coach. When you think of a professional athlete, most if not all professional athletes, when they get to a certain level of expertise, they all have at least one coach. Sometimes they have multiple coaches for different aspects of the game. The role of the coach is not to perform the sport better than the athlete. That's not why they're there. The role of the coach is to take a look at how the athlete performs and then provide feedback. So, it's a support role. And yet it's so crucial that when you want to improve, you turn to coaches to say: “Can you look at what I'm doing and give me some advice?” And that's what a good financial advisor is supposed to do. Take a look at what you're doing, understand what your objectives are, understand, as you said, what the plan is, what the investment horizon is, and then provide you with advice. And, you know, take you by the hand and accompany you through those storms, as I call them, and knowing that at the end of the storm, there will be sunny skies. And I know we'll get through this because we've gotten through many other storms in the past, and it's always been like this! The market does not move in a single direction, whether it's up or down. It just ebbs and flows. And the idea here is you need to have somebody to say to you: “Take a breather. We'll get through this. It's not the end of the world. And at the other side, we will recover anything that we have temporarily lost. It will come back and we will continue to move ahead.”

Sébastien: So a voice of reason reminding you what the plan is, reviewing the plan if needed.

Pablo: Absolutely.

Sébastien: Just these three little elements here, they make a ton of difference. And you know, Ashleay, with your real estate empire that you're building…

Ashleay: (Laughs) Yes, absolutely.

Sébastien: You know, if Ashleay and I, we team up together and we say: “Right, we need an investment coach” and we ask you, Pablo, to be our investment coach. What would be your key advice?

Pablo: So obviously, if we’re looking at providing advice to you two, definitely, you know, I feel like you’re already very much in the know, you’re already professionals. So there really wouldn't be much for me to give you in terms of advice. But just in a general manner, the idea behind investing and the idea behind the markets: it does not have to be complicated. Honestly, it really is more our attitude towards investing and the markets where it starts to get complicated. Because when you're thinking about investing, it very much is governed by your emotions. It's governed by your personality, by your character. Take two different types of investors: Take somebody who's extremely prudent, conservative, and somebody who's very aggressive or, you know, risk tolerant. Those two investors will have very different reactions to exactly the same market. So, when you think about advice to give people regarding investment, really much less about the markets, much more about their own emotions and their character and their personalities. I would go back to really the three basic golden rules about investing.  One: be patient. Number two: be diversified. Don’t put all of your eggs in one basket. What I’m referring to is, be diversified with the investments. You can have one financial advisor that provides you with great diversified advice, and you can be very well diversified in dealing with only one person. So be patient, be diversified, and the third golden rule is: invest regularly. If you can, do not put in everything in one shot and, you know, close your eyes and pray real hard that that was the right day to make that investment.

Ashleay: Right.

Pablo: If at all possible, try and time these investments over a longer period, invest on a regular basis. And when you do that, when you follow those three golden rules, over time you will achieve your financial results. There is no other way around that.

Sébastien: Yeah, very good advice. And, you know, I would add a few other satellite advice, like know what you're investing for. You know, a short term horizon, a long term horizon: that will influence your behaviour for sure. Take into consideration all of your assets. If you have a house or you don't, if you have a pension fund or you don't. That will influence how you should invest: more equities, less equities. You know, what do you need to invest for. So, all of this again, it relates to having a coach in your corner.

Pablo: And a good financial advisor, a good coach, will have that aggregate view of everything that you have and be able to provide you advice from a total perspective.

Sébastien: Yeah. So, the principles are universal, but the solution is specific to everyone's needs.

Pablo: Absolutely. Yes.

Ashleay: And it's important to understand that a good coach or consultant must first and foremost protect his clients or her clients from themselves, if I understand correctly.

Pablo: There has to be this understanding between the coach and the investor or the client. That is not something that happens automatically and it's not something that happens with everyone. You do need to make sure that your financial advisor, that your coach, first of all, is competent, that they understand your objectives and your priorities and your needs, and they put those first. That's obviously part of that building of the relationship. They are there to emotionally grab you by the hand and accompany you across or through the storms in quotes, through the more difficult periods. And knowing that on the other side of it, there will be – to extend that analogy – there will be sunnier days!

Ashleay: Right!

Pablo: So when you are able to develop that relationship with the coach – and it may take a little bit of time, it may not be the first person that you meet that is your ideal coach – but when you do find that person and you invest yourself, because obviously this is not something that the financial coach is able to do on their own, they cannot carry the relationship only on their shoulders: this is a 2-way street. When you find that financial advisor that understands you, that puts your interests ahead, that brings added value in terms of ideas, suggestions, plans, that accompanies you, when you have that, the results are magical. Somebody that has a financial coach has so much more in terms of assets after a period of 10, 15, 20 years. That's the reason why: it's that relationship that gets you to those results.

Ashleay: Wow! Well, thank you so much, Pablo. That's all for today! Thank you also, Sébastien, for discussing how being accompanied is beneficial. Thanks also to our listeners. Don't hesitate to contact us if you have any questions and we will see you all next week. Loved this podcast? Want to know more about economic news? Follow our “In Your Interest!” podcast, available on all platforms, visit the economic news page on ia.ca or follow us on social media.