Performance and behavior

Never before has it been so easy and inexpensive for people to handle the financial matters themselves that were previously the protected domain of financial professionals. The internet has changed everything.

Now anyone can research investments, trade stocks, file tax returns, refinance mortgages and shop for insurance online, without ever leaving home.

So, why is it then that financial professionals are in greater demand than ever? According to the Securities Industry Association, employment in the brokerage industry alone has grown by 38% in the past ten years, despite a lousy market.

Time, aptitude and inclination. Some people would simply rather have a professional save them the time and the headaches of financial decisions. Some just don't have any desire to go it alone and others are not comfortable with financial tasks even though technology has made it so easy.

"It's not rocket science - the basic investment ideas are diversify, allocate your assets, control costs and pay attention to taxes," said Terrance Odean, a professor of behavioral finance at the University of California at Berkeley.

"But if you're not comfortable doing such things, it's not a bad idea getting advice."

Perhaps investors are also discovering that their investment performance is much better when assisted by professionals. Dalbar, a Boston financial research firm, reports in its 2005 Quantitative Analysis of Investor Behavior, that the average mutual fund investor averaged only a 4% annual gain in the past twenty years while the overall market generated average gains of over 12%. Dalbar suggests that the irrational actions of individual investors and the lack of discipline hurt performance.

While many investors can overcome these hurdles, most need the support of a financial advisor to supply the discipline.

The most important role of the financial advisor is to protect clients from the behaviors that erode their investments and savings.