What Is the Value of Partnering With a Financial Advisor?

Written by True Tamplin, BSc, CEPF®

Reviewed by Editorial Team

Updated on March 10, 2023

How Can a Financial Advisor Help Me?

If you're like many consumers, the world of investments and insurance can seem like a confusing maze of products, services, charts, graphs, illustrations, promises and risks.

This is where a financial advisor can help you to make sense of your own finances by helping you to identify your investment objectives, risk tolerance and time horizon.

Some advisors only dispense advice for a flat or hourly fee, while others charge commissions or a percentage of assets under management.

But a good financial advisor is always worth the money that they charge, regardless of the business model that they use.

The value of partnering with a good financial advisor cannot be overstated.

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Financial Advising

If you are a novice when it comes to investing, then a good advisor will get you started on the right track by first helping you to define what your investment objectives are-or should be.

For example, if you are a very risk-averse person, your advisor may explain to you that your current portfolio is subject to inflationary risk.

He or she would probably recommend that you move at least a portion of your money into some form of equities or equity mutual funds in order to grow your money over time.

Or you may have all of your money in stocks when you're about to retire.

In this case, your advisor would most likely tell you to move a portion of your money into more conservative holdings so that you are not taking so much market risk.

This is because you may not have time to make up for large losses if the markets experience a severe correction.

A good advisor can also help you to determine exactly which types of risk you should be taking with your money, as well as how much of each type.

There are several different types of investment risk, and every type of investment is subject to one or more of these risks. There is no such thing as a truly risk-free investment.

Investments that guarantee your principal and pay a guaranteed rate of interest may be viewed as "safe", but your purchasing power will usually erode over time due to the effects of inflation.

A good financial advisor will also help you to determine the appropriate time horizon for your money.

A general rule of thumb that most advisors counsel their clients to use is to have at least three to six months of income saved in a liquid account such as a money market fund.

This fund can be used to pay for unexpected expenses or to carry you through a period of unemployment.

This is essentially short-term money. Then your advisor can help you to determine the correct asset mix for your retirement savings based on your risk tolerance and time horizon.

If you don't want to risk your money in the markets but still want to earn higher returns that guaranteed instruments pay, then an indexed annuity may be what you're looking for.

Your advisor can help you to find the best possible product in the marketplace and thus save you a great deal of time and research.

Ways a Financial Advisor Can Help

There are other ways that a good financial advisor can add value to your financial circumstances.

  • They can help you to plan for your kids' college education and also show you how to create a sound estate plan that ensures that your money and tangible assets are distributed in the manner that you desire with a minimum of time and expense.
  • And many competent advisors also know how to reassure their clients that things are going to turn out OK during periods of market turbulence.
  • And even if you have a clear idea of what you want to do with your money, a good advisor can show you the best investments or insurance products to accomplish this with.
  • A good advisor always keeps up with the latest innovations in the financial industry and can steer you to the most competitive offerings so that you get the most bang for your buck.

How Can a Financial Advisor Help Me Meet My Financial Goals?

Your advisor may also be able to coordinate your overall financial plan by working with the other financial professionals you use, such as your income tax preparer, insurance agent or stockbroker.

He or she can help to direct their activities so that they all combine to achieve your financial objectives.

  • Your attorney can design your estate plan, but he or she may not be able to advise you competently about which assets you should have in which accounts.

  • Your broker may be able to actively manage your assets in a way that your financial advisor cannot, but your advisor can tell you which block of stock to sell so as to minimize your capital gains tax.

    Your broker may also show you a new investment to consider, but your advisor can tell you whether it fits your investment objectives.

  • Your insurance agent may also have access to the best property and casualty policies in the market, but your advisor can tell you what size deductible you should have on them and how much coverage you really need.

  • Your income tax preparer can file your return for you, but your advisor can tell you when it's the best time to convert your traditional IRA into a Roth account.

  • Your human resources department can tell you which funds are available in your employer-sponsored retirement plan, but your advisor can analyze each of these offerings and tell you which ones to use.

A good financial advisor will be worth more than just the money that he or she helps you to earn with your savings.

They can improve the quality of your life by simplifying complex issues and helping you to clearly see financial reality and act accordingly.

He or she can ultimately give you peace of mind about your financial situation and enable you to move forward with confidence.

A good advisor can thus help you to sleep peacefully instead of lying awake at night and worrying about your money.

A good advisor is always just a phone call away. Understanding the value of the services financial advisors provide is important.

If you are interested in hiring one, read this article to ask better questions to identify the perfect advisor for you: 12 Questions to Ask a Financial Advisor.

What Is the Value of Partnering With a Financial Advisor? FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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