An Investment Adviser’s Value Proposition: When and Why Do I Really Need a Financial Adviser?
At what point should you hire a financial adviser? People often assume the answer to this question is largely based on the size of their portfolio. Once your portfolio has reached a certain size, either the job becomes too daunting or complex or the risks of making a wrong move carry too much weight. In truth, the decision on whether you need an adviser is a much bigger discussion than simply the size of your portfolio. Financial advisors do much more than the obvious tasks of managing investments in a portfolio or telling you if you have enough money to retire. In fact, much of the value an advisor provides lies in the relationship. It is in the intangible, the psychological and behavioral guidance that comes with the relationship. So what value, specifically, does a good advisor provide? Mitch Anthony, a financial planning pioneer, does a good job of breaking it down to six key areas:
Advisers can help you keep your financial house in order, which means something different for everyone. A good adviser can identify areas of need to help a client be more organized and feel more in control. Have you ever sat in front of a stack of financial papers and felt completely overwhelmed? Ever wonder what you should keep, what you should shred, how long you should keep a file? Organizational help can be basic tasks like document management and maintaining vital records. Or it can be more complex, such as keeping track of your various retirement contributions and facilitating your charitable contributions.
Advisers can help you follow through on your financial commitments. A good adviser will know you and have a thorough understanding of your values and goals. But even further, they will recognize how your strengths and weaknesses can affect your financial behavior. They can help you understand your spending habits, establish a budget, and hold you to it. They will remind you of your priorities and what you need to do so that you reach your goals, whether that is saving for college, retirement or leaving a specific legacy for your children.
Advisers can provide an objective point of view. They can guide conversations and help navigate emotionally fraught decisions. This can come into play at all stages of wealth accumulation, from early career through retirement. For example, couples can have differences of opinion when it comes to financial decisions. They might disagree on spending priorities or how much to eventually leave their children. Another example is providing guidance and support through the loss of a spouse or as you age and decline mentally, and they can intervene if there is a problem. A good adviser can help you revisit your values and goals, acting as an objective listener and referee.
Advisers can help you anticipate life transitions and make sure you are financially prepared for them. Big life events, such as having a baby, sending a child to college and retirement, all require proactive planning. These transitions are easier if you are mentally and financially prepared. A good adviser will proactively have these discussions with you and work with you to accomplish what needs to be done to be prepared for these transitions.
An adviser of course will have their educational credentials and experience, but every client has their own unique set of circumstances. A good adviser will research and explore all your specific options to help you make an educated decision. They can then explain your options and risks associated with each choice. Education can assuage a lot of worries and fears. By educating and informing, a good adviser can help you feel more empowered and informed about your situation, confident that you are making the best decision.
An adviser will work with you, not just for you, to help you to achieve the best life possible with the money that you have. By partnering with you, being deeply knowledgeable about your situation, your needs and objectives, a good adviser can collaborate with you to maximize your outcome. This might come in the form of identifying opportunities in your financial plan, helping you maximize Social Security or working in conjunction with your accountant or attorney in some cases.
The value is in the relationship. The value is in knowing you and partnering with you, sharing our wisdom, experience, and insight. As a fiduciary, we are required to know our client, know your needs, and put them first. Many important decisions in life are inevitably money related. The goal is to help you live your best life possible with the money you have.
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