What value does a financial advisor actually provide? This may surprise you, but the value of a quality financial advisor goes far beyond portfolio advice. It’s about guiding clients to develop sophisticated financial behaviors. With robo-advisors and consistent market volatility in the headlines, it’s important to realize the comprehensive advantages of working with a personal advisor – not a computer algorithm.

A recent study by Fidelity Investments discovered that working with a financial advisor can add up to 4% higher investment returns. In a similar study, Vanguard estimated that the quantitative value of a financial advisor is about 3% on a net basis (4% minus a 1% fee). Additionally, an advisor can give you peace of mind by boosting your financial confidence in the following areas:

1. Developing a workable financial plan
2. Serving as a behavioral coach
3. Creating a consistent investment strategy
4. Navigating retirement savings plans
5. Developing a tax-sensitive investment strategy

1. Developing a workable financial plan

Regardless of life stage, we work with families and individuals to develop plans that allow them to achieve several financial goals at once, such as paying off student loans, saving for a desired vacation, and building a reserve for emergency expenses. After examining a client’s income, expenses, and spending habits, we can set priorities, identify areas where expenses can be reduced, and develop a savings plan to achieve both short and long-term goals.

2. Serving as a Behavioral Coach

In a world where personal financial issues have become increasingly complex, we help clients figure out what’s true or false, what works, what matters, what is useful, and what can go wrong. Not many people have sufficient expertise to do that themselves—especially with an objective mindset. We provide support to clients so they stay on course in times of financial stress to help eliminate poor financial decisions. It’s easy for investors to fall victim to common cognitive biases that affect their decisions. Guiding clients to more responsible financial behaviors can help in a myriad of ways, such as realizing the benefits of long-term investments and enjoying the security and peace of mind that comes from having sufficient retirement funds.

3. Creating a consistent investment strategy

Numerous studies show that when investors manage their accounts themselves, they tend to overreact to market changes by trading too frequently. According to the 2016 Dalbar Quantitative Analysis of Investor Behavior Study, disciplined investors can see nearly double the returns on their investments over 20 years compared to those who try timing the market. With many clients, we guide them through selecting an appropriate mix of investments, rebalancing their investments as needed, and executing a consistent investment strategy that will keep them from making rash decisions.

4. Navigating retirement savings plans

A lack of retirement savings is a significant problem for many Americans due to longer lifespans, expensive medical care, and the rising cost of living. Without the guidance of a financial advisor, many Americans ignore the need for a solid retirement savings plan. Working with a financial advisor can help you determine the ideal time for retirement, the amount of savings needed to meet your retirement goals, and your ideal retirement age to guarantee income for life.

5. Developing a tax-sensitive investment strategy

Tax efficiency is a critical part of financial planning. We often give advice on issues such as tax-loss harvesting in brokerage and other taxable accounts, managing exposure on short-term capital gains, charitable giving, and more. While tax issues are not the main focus of our clients’ investment strategies, advice on how to manage, defer, and reduce tax exposure has the potential to improve returns by as much as 1% to 2% per year.

While financial advice is often perceived as simply implementing an investment portfolio or dispensing financial guidance, that truly is just one slice of the pie. When it comes to the five financial areas above, you can’t get any better than having a personal advisor there to help you navigate the complexities of your financial situation.

If you’re interested in learning more about how we can help you with your finances, please contact us for a complimentary consultation.

Sources:

Fidelity Investments. (2017, Dec. 14). The value of advice [Blog post]. Retrieved from https://www.fidelity.com/viewpoints/investing-ideas/financial-advisor-cost

Pfau, W. (2015, Jul 21) The Value of Financial Advice [Blog post] Retrieved from https://www.forbes.com/sites/wadepfau/2015/07/21/the-value-of-financial-advice/#71caf4ca1333

Douglass, M. (2017, Apr. 2). Yet another study shows that timing the market doesn’t work [Blog post]. Retrieved from https://www.fool.com/investing/2017/04/02/yet-another-study-shows-that-timing-the-market-doe.aspx

Benjamin, J. (2014, Jan 27) Financial advisers can add 3 percentage points to client portfolios: Vanguard [Blog post]. Retrieved from http://www.investmentnews.com/article/20140127/FREE/140129915/financial-advisers-can-add-3-percentage-points-to-client-portfolios

Americans are living longer. That’s the good news. The bad news is that most people aren’t financially prepared. Many Baby Boomers will be in retirement for over 20 years and unfortunately, many aren’t saving and investing with a longer life-expectancy in mind.

 There are serious consequences to financial planning around the wrong life expectancy. Some retirees are working later in life; others live in fear of running out of money, while others are leaving less of a legacy than they hoped. No one wants to run out of money in retirement.

How Long Should You Expect to Live?

The Social Security Administration notes that at 65-years old, the average man can expect to live to roughly 84.3 years of age, whereas the average 65-year old woman can expect to live until age 86.6. This means that on average, Americans can expect to spend about 20 years in retirement.

However, there is a strong chance that you should plan to be in retirement much longer than 20 years. One out of every four 65-year olds will live past the age of 90, and one out of every 10 will live past the age of 95. Are you prepared for three decades of retirement? Most people aren’t.

With these figures in mind, here are 3 steps that can be taken to ensure your financial longevity:

Step 1) Develop a Clear Vision of Your Retirement Lifestyle

To create a well-conceived plan and have the will to faithfully execute it, you need a clear vision of your lifestyle in retirement. Start by defining your goals and asking yourself:

• Where will I live?
• Where will I travel?
• What will I drive?
• How will my hobbies change?
• Where will I donate my time and money?

It’s important to factor realistic spending assumptions into the cost of your retirement, based on your goals and desired lifestyle. Your plan should also include contingencies for health care costs and unexpected expenses.

Step 2) Adjust Investment Strategies

Start to plan for a longer retirement by adjusting your investment strategies — like saving more, being slightly more (or less) aggressive with your investment strategy, etc. We ensure our clients have these bases covered, so consider calling us if you’d like someone to review your investment strategies. We’re experienced in retirement planning if:

• You are within 5 years of retirement
• You have recently experienced a significant change in your income
• Your investment accounts are exposed to higher risk due to natural market fluctuations
• You aren’t confident that you are still on-target for your retirement and legacy goals

Step 3) Consider Health Insurance Options

Health insurance is the most expensive and bothersome insurance the average individual carries. Unfortunately, many people approach retirement and believe that the burden of health insurance will be lifted. In reality, even when covered by Medicare and other supplemental insurance plans, there are still substantial costs left for the individual to pay.

In addition to premiums, deductibles, and co-pays, prescription drug costs are likely to rise. In the last decade, the average annual cost of one brand-new drug used to treat chronic health conditions cost a senior $5,800 (2015), compared to $1,800 less than a decade earlier (AARP). Planning for a longer retirement requires keeping a keen eye on the rising cost of healthcare in the US.

Understanding the stresses that come with ensuring your financial longevity, we’re here to help you sort out the complications of an ever-changing financial plan. Contact us to review your retirement, legacy, and estate plans. Together, we’ll create a clear strategy that points you toward a comfortable retirement, whether it lasts one decade or three.

Almost everyone stresses over the daily obligations of financial planning, but many also neglect the significant life stages that require special attention and strategies. Here are 8 key life events that could benefit from professional financial guidance.

1. Graduating from College

College graduation marks the first major transition into adulthood. The progression from school to career is a significant milestone and the perfect time to get financial advice.

Whether you or a loved one has graduated, this is also a great time to assess needs such as college debt repayment, savings strategies, or insurance.

Luckily, most recent graduates have time on their side. With the decades ahead and the power of compound interest, it’s the perfect time to have a discussion about the benefits of saving right now. The financial foundation built now will have a major impact on the rest of your financial life.

2. Marriage or Divorce

Professional finance advice is extremely beneficial at the time of marriage. Goals such as combining finances, handling credit issues or debt problems, and building a successful financial life with your spouse will be hard to establish without objective financial advice.

On the other end of the spectrum, divorcees should ensure that they protect their finances. If you’re entering divorce proceedings, important tasks like updating your will, changing your insurance policies, and protecting your investment accounts need to be handled with care and are best managed by a professional.

3. Adding a Member to Your Household

The birth of a child is a miraculous event, but that new addition will bring huge financial and lifestyle changes. College funds will need to be created, wills and insurance policies need to be updated, and a whole host of new expenses will need to be managed. Make sure that your new bundle of joy is off to the best start possible by bringing in a professional.

4. Job and Income Changes

Whether you are starting a new job, changing careers, or accepting a well-deserved promotion, there are important financial considerations to address. During a job change, you’re better off with a financial planning professional who can help you minimize taxes by rolling over retirement accounts and making the most of your stock options. A professional can also help you adjust your financial plan so you start putting more money aside and preparing for a future of continued financial growth.

5. Buying and Selling Property

If you’re buying a home, a professional can help you review your situation in an effort to maximize your tax benefits, deal with capital gains exclusions and taxes, and find write-offs and deductions you might otherwise have missed. Buying and selling property is complicated, and it’s not worth tackling on your own.

6. Illness or Hospitalization

An unexpected illness or hospitalization can strike at any time, and when it does, your finances are soon to be impacted. If you find yourself hospitalized or stricken by a sudden illness, reaching out to a professional could minimize the financial impact and help you recover more quickly. A financial advisor will also help with long-term care options and disability insurance, estate planning, life insurance, and a host of other planning topics that will have an impact on your overall portfolio.

7. Inheriting Property

Dealing with an inheritance can also be complicated, hence why it made our list. If your inheritance comes in the form of a lump sum, it is important that you minimize the tax bite and address outstanding debts. If you are inheriting a retirement account like a 401(k) or IRA, you’ll definitely benefit from assistance with rollover options and investment advice.

8. Retirement

Retirement may be the most important transition in your life. From maximizing and managing benefits to developing a distribution strategy, the right professional can be an invaluable resource.

Everyone wants to feel comfortable by establishing long-term financial security, so it’s worth taking an honest look at your current financial situation and goals. Every day we take the complexity out of financial planning for our clients. We can make it simple for you too, so don’t hesitate to contact us directly if you need someone to look over things with you.