The Value of a Financial Advisor in 2018

March 29, 2018

Some people prefer to manage their finances themselves because they enjoy it, but for everyone else, hiring a capable financial advisor is likely in your best interest. The majority of people don’t have the time or passion to dedicate to it and stand to benefit from hiring an advisor.


Companies hire a Chief Financial Officer to handle the finances of the company. Think of getting a financial advisor like hiring your own personal CFO. Much like a job interview, you will need to make sure the person is a good fit for you, is certified, and has the experience to get the job done well.


Vanguard estimates that the value of using an advisor is around 3% additional net annual gains for the investor. Justin Wagner from Vanguard offers the following example. Suppose the overall market return is 8%. Without good financial decision making, the combined impact of fees, taxes, and poor investment decisions is around 4%. This leaves a net return of 4% to the investor. However, for someone working with a capable advisor, they eliminate poor investment decisions, minimize taxes, and only pay the 1% fee, leaving a net return of 7%. That is the Advisor Alpha. The value added by good advice can greatly exceed the fees.


Vanguard’s whitepaper further explains that, “Although every advisor has the ability to add this value, the extent of the value will vary based on each client’s unique circumstances and the way the assets are actually managed, versus how they could have been managed.” This is why finding the right advisor is just as important.


The focus and reward of having an advisor is less reliant on them beating the market and more about the advisors properly planning and strategizing, remaining objective during volatile markets, and guiding clients through important financial decisions. An advisor will grow and protect your wealth, but the majority of their success stems from knowledge of wealth management best practices.


Identify Risks

One of the first steps in working with a financial advisor is to assess your risk tolerance. This is the foundation of the strategy that a financial advisor will build for you. Based on the assessment of your risk tolerance, the advisor will be able to tailor their decisions to your preferences and situation. A basic example is if your goal is to be prepared for retirement, and you have 3 years before you reach that milestone, you’ll ideally want a portfolio with as little risk as possible. Beyond assessing your risk tolerance, they also identify risks in the market that would be difficult to notice without being able to understand and or identify the red flags. The ability to keep a constant pulse of the market makes protecting wealth much easier for advisors than it is for someone already working full-time.


Protect Your Wealth

There are many ways in which an advisor can help protect your wealth. This includes advice on tax savings, life insurance policies, wills, inheritance, divorce, job switches, refinancing and many more. If it has a financial impact on your life, the advisor will be there to make sure you’re following best practices. The value of a financial advisor tends to be internalized most at these big moments. They help you avoid bad decisions that could follow you around forever. Certified financial planners adhere to their fiduciary duty to act in your best interest and will serve as the guardians of your wealth.


Grow Your Wealth to Achieve Goals

The ceiling on how much money your money can make for you is virtually endless. A financial advisor can help you choose the right investment vehicles that give you the best chance at maximum returns. One of the biggest pitfalls of do it yourself investing is folding under the pressure of a negative market sentiment. When looking after your own wealth, you’re inherently tied to your money emotionally, so it can be difficult to stay objective, especially during times with volatile market conditions. An experienced advisor will be able to remain objective when making decisions.


The Verdict

Whether you’re looking to achieve specific financial goals like saving for your children’s college tuition or saving for retirement, or you simply want to optimize your wealth, a financial advisor following best practices will give you peace of mind and more time to spend on the things you enjoy doing. Even if you’re handling your own finances, it can still be useful to hire a financial during transitional life events that require a little more specialized knowledge. You could rest assured knowing your money in motion is cared for.



Polaris Greystone Financial Group, LLC is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Advisory services are only offered to clients or prospective clients where Polaris Greystone Financial Group, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Polaris Greystone Financial Group, LLC unless a client service agreement is in place.


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