How the Right Advice Can Boost Financial Confidence

What value does a financial advisor actually provide? This may surprise you, but the value of a quality financial advisor goes far beyond portfolio advice. It’s about guiding clients to develop sophisticated financial behaviors. With robo-advisors and consistent market volatility in the headlines, it’s important to realize the comprehensive advantages of working with a personal advisor – not a computer algorithm.

A recent study by Fidelity Investments discovered that working with a financial advisor can add up to 4% higher investment returns. In a similar study, Vanguard estimated that the quantitative value of a financial advisor is about 3% on a net basis (4% minus a 1% fee). Additionally, an advisor can give you peace of mind by boosting your financial confidence in the following areas:

1. Developing a workable financial plan
2. Serving as a behavioral coach
3. Creating a consistent investment strategy
4. Navigating retirement savings plans
5. Developing a tax-sensitive investment strategy

1. Developing a workable financial plan

We work with women and couples to develop retirement plans that allow them to focus their time and attention on living their best retirement.  We believe in comprehensive retirement plans that cover retirement income planning, tax planning, investment management, risk management, estate planning, legacy planning, and wealth management.  After examining a client’s current situation, we can set priorities and identify areas where improvements can be made to achieve both short and long-term goals.

2. Serving as a Behavioral Coach

In a world where personal financial issues have become increasingly complex, we help clients figure out what’s true or false, what works, what matters, what is useful, and what can go wrong. Not many people have sufficient expertise to do that themselves—especially with an objective mindset. We provide support to clients so they stay on course in times of financial stress to help eliminate poor financial decisions. It’s easy for investors to fall victim to common cognitive biases that affect their decisions. Guiding clients to more responsible financial behaviors can help in a myriad of ways, such as realizing the benefits of long-term investments and enjoying the security and peace of mind that comes from having sufficient retirement funds.

3. Creating a consistent investment strategy

Numerous studies show that when investors manage their accounts themselves, they tend to overreact to market changes by trading too frequently. According to the 2016 Dalbar Quantitative Analysis of Investor Behavior Study, disciplined investors can see nearly double the returns on their investments over 20 years compared to those who try timing the market. With many clients, we guide them through selecting an appropriate mix of investments, rebalancing their investments as needed, and executing a consistent investment strategy that will keep them from making rash decisions.

4. Navigating retirement savings plans

Insufficient retirement savings is a significant problem for many Americans due to longer lifespans, expensive medical care, and the rising cost of living. Without the guidance of a financial advisor, many Americans ignore the need for a solid retirement savings plan. Working with a financial advisor can help you determine the ideal time for retirement, the amount of savings needed to meet your retirement goals, and your ideal retirement age to guarantee income for life.

5. Developing a tax-sensitive investment strategy

Tax efficiency is a critical part of financial planning. We give advice on issues such as Roth conversions, Net Unrealized Appreciation, executive compensation, tax-loss harvesting in brokerage and other taxable accounts, managing exposure on short-term capital gains, charitable giving, and more. Advice on how to manage, defer, and reduce tax exposure has the potential to improve returns by as much as 1% to 2% per year.

While financial advice is often perceived as simply implementing an investment portfolio or dispensing financial guidance, that truly is just one slice of the pie. When it comes to the five financial areas above, you can’t get any better than having a personal advisor there to help you navigate the complexities of your financial situation.

If you’re interested in learning more about how we can help you with your finances, please contact us for a complimentary consultation.

Sources:

Fidelity Investments. (2017, Dec. 14). The value of advice [Blog post]. Retrieved from https://www.fidelity.com/viewpoints/investing-ideas/financial-advisor-cost

Pfau, W. (2015, Jul 21) The Value of Financial Advice [Blog post] Retrieved from https://www.forbes.com/sites/wadepfau/2015/07/21/the-value-of-financial-advice/#71caf4ca1333

Douglass, M. (2017, Apr. 2). Yet another study shows that timing the market doesn't work [Blog post]. Retrieved from https://www.fool.com/investing/2017/04/02/yet-another-study-shows-that-timing-the-market-doe.aspx

Benjamin, J. (2014, Jan 27) Financial advisers can add 3 percentage points to client portfolios: Vanguard [Blog post]. Retrieved from http://www.investmentnews.com/article/20140127/FREE/140129915/financial-advisers-can-add-3-percentage-points-to-client-portfolios

^{This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Please note, changes in tax law or regulations may occur at any time and could substantially impact your situation. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was created by The Oeschli Institute to provide information on a topic that may be of interest.}