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The recession seems to have knocked out many investors' appetite for investment risk. A recent study by Northstar Research Partners and Sullivan, a communications firm, has found that over half of affluent investors, 58 percent, focus on protecting principal while only 39 percent worry about growing their money over the long term.
Affluent investors were defined by the study as households with over $100,000 of investable assets.
Plus, the number of people who call themselves conservative investors has nearly doubled since 2008, when only 22 percent of those surveyed identified themselves as conservative. Today that number is at 41 percent.
Despite the large numbers of investors who are focused on not losing money, many worry about meeting long-term goals. Ninety percent reported that they are concerned about retiring comfortably and two-thirds worry about maintaining a comfortable lifestyle.
Balancing the competing needs of principal protection, long-term growth and income in retirement can be tricky. Working with a financial planner can help investors get their ducks in a row. A financial planner can help you set up a portfolio that accounts for cash needs in the near, mid and long term in addition to providing long-term growth.
Unfortunately, completely risk-free returns are not enough to reach long-term goals unless you start with a giant pile of money. A financial planner should be able to find a compromise between investing skittishness and future goals.
What is your tolerance for risk? Do you think you invest aggressively enough to meet your goals?
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Possibly, we do put too much confidence in designations. But I think it's a good place to start, though it would certainly not be the end point if I was looking for a financial planner. I think well-known designations such as the Chartered Financial Consultant and Certified Financial Planner at least indicate that the person has completed broad and comprehensive courses in financial planning with a certain number of work hours and continuing education requirements. Of course, those don't guarantee anything in the way of the competency or personal ethics of individuals. Investors would still need to go through the vetting process before they decided to work with a planner.
As for the CFP Board's recent marketing campaign, I would think that if it's successful it would put advisors lacking the designation at something of a disadvantage but, on the other hand, it could be a useful public service to educate the public on the CFP designation and what it means.
I was just wondering if you think we are putting too much confidence in designations. I am a financial advisor in Colorado and it just seems to be the same old narrative. I have never held a CFP but now they are on a marketing campaign to brand themselves as the Gold standard and I am wondering if it is more of a question of process rather than designation at this point?