Financial Literacy

Financial literacy helps investors make better decisions

Some people step over a dollar in order to pick up a dime. Often, it happens because people fail to grasp the value of dollars or cents, and lack the help to do so.

“Folks need to understand the value of working with an advisor, and that cheapest isn’t always best,” said Thomas E. Hoffman, AIF®, CFS®, CRPS®, a partner with Capital Analysts of New England. Hoffman added that investors, many of whom lack exposure to even basic financial literacy concepts, often chase the low fees associated with products such as index funds, but step over dollars along the way. “I could name a bunch of managed funds that consistently beat their respective industries, isn’t the investor better-served to be in a managed fund that’s beating the index and expenses?”

Capital Analysts of New England, Inc., based in Braintree, Massachusetts, provides wealth management along with financial, retirement, and estate planning, among other services. Hoffman, who came to finance after years in public relations with the New England Patriots, works primarily with high net worth individuals, and currently serves about 100 clients. But even high net worth individuals – educated and competent in their own fields – often lack the financial literacy skills to efficiently grow their money, and that means education takes center stage at Hoffman’s practice.

“A ton of smart people out there just haven’t had the exposure to how credit works, how loans work, the importance of savings, how taxes work, or even basic budgeting,” Hoffman told “Advisors Magazine,” adding that he runs a program for Boston College High School students covering the basics of financial literacy. “We try to do a lot of educating on the basics so that people can feel more comfortable and make better decisions.”

New technologies – the so-called “robo-advisors” – promise to develop investors’ financial literacy skills or reduce the need for them by handling the complex decision-making, but these tools cannot match a human advisor by any stretch, Hoffman said.

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Capital Analysts of New England makes extensive use of technology to process data, compare alternatives, and game out scenarios for clients, especially in regards to longevity planning, but all of these tools require a human interpreter, Hoffman said.

“I almost look at it as kind of like an x-ray, it’ll give you some findings, but then you have to have a doctor interpret it all,” he said.

A close investor-advisor relationship based on mutual trust is more valuable than a dozen software programs, however, and it takes considerable client education to get savers ready to make difficult decisions. Hoffman acts as fiduciary to his clients, meaning their best interests come before commission concerns. The fiduciary mindset is what prompts Hoffman to prioritize educating his clients, empowering them to take charge of their financial futures.

“You can have the best funds in the world and if folks don’t know how much they should be putting away, or if they aren’t putting it away, then it doesn’t make any difference,” he said.

For more information, visit: capitalanalystsne.com

 

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