Why use a Financial Advisor?
I used to get asked a lot about why someone should use a financial advisor? When I started in financial advising in 2013, what had happened is a lot of people had bought into what some of the big firms had done which was to allow the general public to engage in their own trading, and paying fees on every trade. The question was, is that a more effective way to save for retirement?
So many of my friends got tired of wearing so many hats, and being a financial advisor was one they would tell me they didn’t want to do anymore. So, after trying your hand at trading and managing your money, many of you kind of put your head in the sand, and let someone in HR pick a target retirement fund in your 401k, and just didn’t have to deal with it anymore because someone else would. Did that work? many 401ks did not do well, and when you got around to looking at it, the fees were hidden but apparent, the returns weren’t good, and you didn’t know enough about it so you ignored it.
Sound familiar? So, I started looking and found some really interesting things. There is a fantastic article on the advantages of using a financial advisor on Investopedia: https://www.investopedia.com/articles/personal-finance/102616/how-much-can-advisor-help-your-returns-how-about-3-worth.asp. It cites some really interesting studies by very reputable sources showing that utilizing a financial advisor gets a better return on your investments. Another really interesting aspect to it is how many millionaires use financial advisors, which Northwestern Mutual reports at 70%. If so many millionaires use financial advisors to build wealth, shouldn’t you be using one?
Now, these articles are written by financial advisors, so of course they are going to say that, right? So, here is where I legitimately know that a good financial advisor can build up your wealth:
Habits - a good advisor talks to you about your savings habits. One of the Seven Rules of Gold (Wealth) from Richest Man in Babylon, the is Pay Yourself First. Your financial advisor should be pounding the pulpit like a preacher to put money away after you get paid, paying yourself first, before you do anything else. This one habit, of saving a portion of your income EVERY time you get paid, is the single more important financial habit can develop. This will make you wealthy if you start early, and stick to it.
Emotions - money is so emotional! So many people think it’s all about the numbers, but it’s more about the emotions. Fear, anxiety, scarcity, irrational exuberance (that’s a fun one), FOMO, all of these play into good or bad decisions we make with money. Learning to control your emotions on the topic of money is so crucial, and a financial advisor can help to calm those emotions down.
Knowledge - because a financial advisor is studying, learning, reviewing, and thinking on finances every day, it helps to get advice from someone who has it on their mind each day. This is in line with another rule from Richest Man in Babylon, to Keep your Money Safe. Read about only using wise people with a track record in investing in subjects they know about, and not giving your money to people who don’t know their topic well.
Access - many times financial advisors have access to financial vehicles that are not available to the general public. For example, a financial institution like Vanguard, Dimensional, or others, will have a great ETF fund, but you have to go through a financial advisor to buy it.
Time - a financial advisor will free up your time to earn and save more money rather than have you worry about it all.
Familiarity - your financial advisor will know you, your family, your goals, your dreams, and your habits, and can build a plan for you to follow. They know you!
So, what do you think? Does this help you understand how having a financial advisor can help you achieve your financial goals and dreams?