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Appreciating the True Value of Financial Advice

When it comes to personal finance and investments, you need not only the time but also the expertise to do it well. When you align yourself with an advisor who is tailoring the plan based on your goals, they can guide you across a range of financial issues, helping improve means and quality of life. For many individual investors, the question is not whether a financial advisor is needed, but how to find the right one.



Taking Inventory of Your Wants and Needs

A qualified financial advisor can understand the intricacies of the financial and investment industries and has the experience to help you navigate a unique path that is customized to your financial goals, be they wealth accumulation, preservation or transfer. The right advisor can build a relationship with you that goes beyond traditional financial planning or attaining short-term gains. Instead, a good advisor can work with you to build a long-term partnership that focuses squarely on putting your lifetime financial goals within reach.

Every day, we rely on professionals with the experience and knowledge to accomplish tasks we’re less qualified for or too busy to do. Think of the barista who foams your milk, the tailor who alters your suits, or the accountant who files your taxes. We may not stop to consider the rationale behind our daily decisions to hire outside experts, but these relationships enable us to achieve more and focus on matters we deem most important. However, there are some services we keep “in house.” For instance, you may be more likely to mow your own lawn, paint your living room or cater your own party. This gives rise to a conundrum we all face from time to time: How do I know when it’s time to partner with a professional or go it alone?

And from this one question, others quickly arise: Do I have the time? Do I have the expertise?

If you’re considering a partnership with an advisor, you’ve already taken the first step in acknowledging the importance of managing your finances and investments properly. Your next step should be to assess your current financial state and ask yourself these questions:

  • Have you identified your financial goals?
  • What concerns you the most about your finances?
  • How involved do you want to be in decision-making?
  • What are you looking for from a financial advisor?

The answers to these questions will give you insight into how engaging with the right advisor may be an asset to your financial life.

The Advantage of a Financial Professional

There are several ways in which a financial advisor can add value to your investment efforts. Among these benefits are guidance on developing an overall investment strategy, asset allocation, minimizing taxes, rebalancing, and how to structure and time withdrawals from your retirement accounts. Another valued benefit in working with an advisor is behavioral coaching — helping you manage counterproductive biases and behaviors with fact-based advice and reassurance when markets are stressed.

When you align yourself with an advisor who is tailoring the plan based on your goals, they can guide you across a range of financial issues, helping improve means and quality of life. That can mean avoiding costly mistakes that are difficult to recoup down the road. Savvy investors understand that the power of compounding returns is just as important when it comes to avoiding losses as it is with making gains.

A growing body of research has established quantifiable metrics on the value of more intelligent financial planning decisions for households who use professional advice. How much? The numbers differ based on the studies, methodologies and focus of the research, but Morningstar, in its focus on retirement income, concludes that “intelligent financial planning decisions” can add the equivalent of 1.59% in annual arithmetic returns.1,2

Furthermore, State Street’s research with individual investors3 suggests that in addition to the financial rewards that may accrue to those working with an advisor, it also provides increases in confidence and security that are no less valuable. Case in point: Individual investors not working with a financial advisor reported that they have less well-developed financial plans, have done less advanced wealth management planning, are less confident in reaching their financial goals, and feel less prepared should there be a downturn in financial markets.

Figure 1a: I Have a Well-Developed Financial Plan

I Have a Well-Developed Financial Plan

Figure 1b: I Have Confidence in Reaching My Financial Goals

I Have Confidence in Reaching My Financial Goals

Finding the Right Financial Advisor

A relationship with a financial advisor can be about more than just making a return on your investments. It is also about protecting assets.

Selecting the right advisor for your financial life is key. If you want a solid working relationship that helps you manage your portfolio and make smart financial decisions, it pays to understand how their offering aligns with your objectives. Furthermore, there is a financial advisor for every budget and financial situation so be confident in your exploratory outreach; this relationship is ultimately an investment in your future.

To help you make an informed choice, in addition to the previously posed personal financial status questions, consider asking the following questions when speaking with prospective financial advisors.


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Figure 2: The Majority of Investors Working with an Advisor See Financial Goals As Equally Important to Personal Goals

The Majority of Investors Working with an Advisor See Financial Goals As Equally Important to Personal Goals

Figure 3: Investors View the Advisor Relationship as a Partnership

Reliance on an Advisor: Nearly Two-Thirds of Investors Work with Their Advisor and Make Investment Decisions Together

Investors View the Advisor Relationship as a Partnership

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