The Value of Working With An Advisor
One of the top questions people have about financial advisors is, “why should I work with a financial advisor.” We’re here to help remove the noise around this question and explain the quantitative and qualitative benefits of working with a financial advisor. They might just positively surprise you…
We will cover the following topics, so feel free to scroll on to a particular section if you want to skip ahead:
- What is a financial advisor?
- When should I consider working with a financial advisor?
- What are the quantitative benefits of working with a financial advisor?
- What are the qualitative benefits of working with a financial advisor?
What is a financial advisor?
The wealth management industry likes to use different titles that are often synonymous with each other, but it can confuse people looking for help. A financial advisor can be referred to as a wealth manager, private wealth manager, investment advisor, or financial planner.
The above titles all fall under the same umbrella as financial advisors. A financial advisor is a professional who provides financial advice and guidance to their clients. In other words, financial advisors help their clients make better financial decisions around investments, spending, saving, and planning so they can feel more confident in achieving their unique goals.
In order to become a financial advisor, the individual must pass specific tests. Depending on what type of firm the advisor works for, they are required to pass some combination of the following tests:
- Series 7
- Series 63
- Series 65
- Series 66
You can see if the financial advisor you’re talking to has passed the proper tests by looking at their AdvisorFinder profile and BrokerCheck. (links here!) Note: in rare cases, there are some credentials that States value so highly they waive the Series 65 requirement for advisors.
When should I consider working with a financial advisor?
There is no one answer to the question, “when should I consider working with a financial advisor,” but lets give you common scenarios that lead people to working with an advisor.
Some of the most common scenarios you’ve likely heard include getting married, starting a family, starting a business, selling a business or planning for retirement, or have recently gone through a significant life change like a divorce, separation, or financial windfall.
However, there are other scenarios that aren’t discussed enough, which drive individuals towards working with a financial advisor.
- If you’re feeling stressed or overwhelmed by volatility and are struggling with investing on your own
- If you’re going through a career change
- If you’ve received equity compensation like stock options
- If you are having trouble with healthcare expenses
- If you’re feeling overwhelmed by supporting your family, whether it’s your kids or your parents
All the above scenarios can lead people toward financial distress, which is why they choose to work with a financial advisor. A financial advisor can give you confidence and safety in many parts of your life, and AdvisorFinder gives you the confidence to find the advisor that fits you the best.
What are the quantitative benefits of working with a financial advisor?
After describing the different scenarios that lead people towards working with a financial advisor, let’s discuss the quantitative benefits you may see.
According to Vanguard research, working with a financial advisor “can add up to, or even exceed, 3% in net returns” per year over time. Let’s visualize this:
In this case, we assume that an investor not working with a financial advisor is starting out with $500,000. That $500,000 is compounded with a 10% interest rate over a twenty-year period. The investor would end up with $3,363,750. However, the investor working with a financial advisor, who is also starting with $500,000, will end with $5,761,544 after twenty years. The investor working with a financial advisor will see a 3% increase each year in returns, which, when compounded, is significantly different from the investor who did not work with a financial advisor.
Additionally, from a Northwestern Mutual study, Americans were asked to rate their certainty from 1-100 on a number of different financial topics.
When asked, “How certain do you feel in your ability to plan for retirement?”
✔️People who work with an advisor = 77.5
❌Those who DON’T = 54.6
The benefits of an advisor can be clearly seen, but how about the benefits that are tougher to quantify?
What are the qualitative benefits of working with a financial advisor?
The benefits of working with a financial advisor are far beyond investments. In fact, some of the most significant benefits are related to an individual's health, career, and even relationships.
In the same Northwestern Mutual study, people were asked,“How certain do you feel in your ability to pay for an unplanned health emergency:
✔️People who work with an advisor = 77.7
❌DON’T work with an advisor = 52.4
Working with a financial advisor gives people peace of mind regarding their health and their family's health.
The true value of an advisor permeates into multiple parts of their client's lives over time - their family, investments, job performance, health, and overall life. Choosing to work with a financial advisor can make a significant impact on your life and the lives of your loved ones. AdvisorFinder is here to help make the decision easier for you by giving you access to hundreds of advisors to browse through and research. Remember, you can set up an appointment to meet with as many advisors as possible. If you’re not sure what questions to ask, here are the 10 best questions to ask a financial advisor.
You can browse and research advisors on the AdvisorFinder marketplace!