The Need for Financial Advisors

Registered Investment Advisors (RIAs) and Certified Financial Planners (CFPs) are held to a fiduciary standard for their clients, which means they must have their clients' best interests in mind when choosing investments for them, or they risk losing their certification (Do Financial Advisors Earn Their Keep?). The CFP Board oversees these certifications and is responsible for setting the requirements for all of the certifications of financial planners, as well as making sure the rules are followed by all that are certified. A study conducted by researchers at Harvard and the University of Oregon found that financial advisors do not add much value to investors. This study, named "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry," suggests that there is no added benefit, in terms of saved fees, if the information about the funds can be readily found online. However, the study does not discuss the value added by advisors for interpreting the information and explaining it to the investors using the client's unique situation. The advisor's professional expertise is one of the biggest reasons investors pay advisors (Do Financial Advisors Earn Their Keep?). .
             Professional advisors are worth the costs amateur investors pay to receive their services for several reasons. One of these reasons is the professional guidance experienced advisors have. The amount of options available to novice investors is far too overwhelming without tons of proper research making the advisor's professional advice worth the cost. Sure, anyone can study the markets and learn the vast amounts of terminology associated with investing, but learning all of it and being able to use the information correctly will take a long time. Lots of research has been done over the past decade to determine the relationship between expertise and problem solving abilities (Hershey et al.). The underlying assumptions that this research has looked at are the nature and acquisition of expertise, and how that expertise is used in solving financial problems; the research then compared the strategies novices and experts used to get the answer to different financial situations (Hershey et al.