With a multitude of financial options, robo-advisors and consistent market volatility in the headlines, the world of personal finance is complex. Is it too late to save for retirement? (Never). Should I invest in stocks? How can taxes help me save money?
To feel more confident in these, and other, financial choices, it’s often recommended that you seek the advice of a financial advisor. A recent study by Fidelity Investments discovered that working with a financial advisor can add up to 4% higher investment returns. And a study by Vanguard estimated that the quantitative value of a financial advisor is about 3% on a net basis (4% minus a 1% fee).
For those unfamiliar with the process, here are five ways in which working with a financial advisor can help boost your financial confidence, and your savings account:
Workable financial plan
An advisor can help you develop plans that allow you to achieve several financial goals at once, such as paying off student loans, saving for a desired vacation, and building a reserve for emergency expenses. After examining your income, expenses, and spending habits, you can set priorities, identify areas to reduce expenses, and develop a savings plan for short-term and long-term goals.
Behavioral coach
In the complex world of personal finance, an advisor can help you 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. A quality advisor will provide support so that you 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. An advisor who guides you 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 that comes from having sufficient retirement funds.
Consistent investment strategy
Do you find yourself overreacting to market changes and 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. An advisor can help guide you through selecting an appropriate mix of investments, rebalancing your investments as needed, and executing a consistent investment strategy that will keep you from making rash decisions.
Navigate retirement savings
A lack of 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 an 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.
Tax-sensitive investment strategy
Tax efficiency is a critical part of financial planning. Advisors may give advice on issues such as 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 aspect of the field. When it comes to your financial confidence, you can’t get any better than having a personal advisor there to help you navigate the complexities of your financial situation.
Financial adviser, retirement wealth strategist, founder of Strategy Financial Group and author of “Climbing the Retirement Mountain” and “The Retirement Roadmap,” Calvin Goetz is an Investment Adviser Representative who holds the Series 65 securities license, is life and health insurance licensed in the state of Arizona and is a member of Ed Slott’s Elite IRA Advisor Group™ and the National Association of Insurance and Financial Advisors (NAIFA). For more information, visit StrategyFinancialGroup.com.
