Planning for retirement can be overwhelming, especially navigating market wins and losses. Financial advisors help you reach your retirement goals by providing valuable market insights based on years of experience monitoring the market. Having a financial advisor guide your investment decision-making, can help you reach your retirement goals. A do-it-yourselfer may miss investment opportunities, bring emotion and rash decision-making during market volatility, or take too little or too much risk. A financial advisor can give you peace of mind that you're taking the necessary steps to retire from your federal government job or private sector position with a financial portfolio that fits your needs. Here are 10 reasons to hire a financial advisor, and they all revolve around bringing value to your account and partnership.
How financial advisors add value
Studies have shown that financial advisors add value to retirement planning, and their expert advice can increase your investment returns. This is a critical thing to consider especially if you want to retire early.
They understand the complexities of investing, provide investment strategies, and can help you manage your risk tolerance. Financial advisors are also connected to other professionals, like tax and estate planners, to guide you in other financial decision-making.
A financial advisor can also help you weather professional changes (loss or gain of income and retirement benefits) and personal changes like starting over after a divorce.
There's so much more to consider than just your federal retirement income, and a financial advisor can provide those financial insights.
Russell Investments puts out a study each year called the Value of an Advisor, and in 2023, it put the value at 5.12%.
That's based on Russell Investment's formula of active rebalancing, behavioral coaching, customized experience, and tax-smart insights.
That additional value of your investment account is typically more than the fees you’ll pay for professional advice.
1. Respond to market complexities and changes.
Let's face it, life is constantly changing. New technology, new rules, and new trends.
If you take the DIY route to managing your money, you can make investment mistakes. You don’t know what you don’t know. You may think you know enough to invest, but then again there are likely things you missed in your research. How invested are you? How much time do you devote to your finances every month? It’s probably a fraction of what an advisor spends.
Financial advisors are up to date on the latest rules, trends, and market shifts. Financial advisors offer you the insight you can’t get on your own. They also provide you with the knowledge you didn’t know you didn’t know.
Russell Investments points out that in their first study, ten years ago, a financial advisor was basically a broker. Those days are long gone! Now, they provide all sorts of wealth planning and are always ready to answer questions and connect you with other financial professionals.
Not only are advisors immersed in the financial markets daily, but Certified Financial Planners also take continuing education classes.
With an advisor, you have someone constantly monitoring your account so you don't have to.
2. Financial advisors rebalance accounts and don't set it and forget it
Setting it and forgetting it, as most DIY investors do, is a big financial mistake.
A financial planner adjusts your portfolio as needed. It often pays off in the long term, helping you achieve your retirement goals. The Russell Investments study found rebalancing on a hypothetical account would potentially reduce volatility by about 1.99%.
A financial advisor will be able to manage your short and long-term goals while balancing your portfolio.
3. Financial advisors guide decisions avoiding analysis paralysis.
There are so many ways to invest your money. That’s why it’s hard for the average investor to know where to start.
With investments, it's easy to get analysis paralysis when you're sorting through all the research. Ever felt it? It’s frustrating. You spend hours researching a topic – whether it’s the best financial product or the best RV to buy for retirement – yet you still can’t make a decision. You analyze every angle of every choice to the point of paralysis.
A financial advisor will break through your analysis paralysis and provide the pros and cons of all the financial products, funds, and investment vehicles.
4. Provide personalized insights.
We all have unique financial situations, and they're ever-changing. Life happens and financial situations change. Perhaps you worked in the private sector for a while and then switched to a federal job. That changes your retirement benefits dramatically.
A financial advisor can help you adjust when needed and provide personalized insights for changing personal and professional financial decisions.
They can look at your full financial picture and provide customized advice rather than a one-size-fits-all approach. If you have children, your financial planner will guide you on 529 or college savings plans and your retirement options.
If you're thinking about moving to a city like Kansas City, they can help you with taxes and cost of living. When you move, your financial advisor is available to answer questions about how that may or may not change your financial situation. If you have a child preparing for college, they can answer questions about the FAFSA.
Perhaps you start a new job and leave the private sector for a federal position. Your advisor can help in that situation or in the case of getting remarried. These life decisions can change financial decisions and how you manage your money. A financial advisor is always there to provide personalized insights.
5. Financial advisors are always available to talk and answer questions.
Have you ever thought something sounded good until you talked it over with a trusted friend, spouse, or colleague only to realize it's not the best plan?
That’s why it helps to talk things out, sort through the data, and make decisions. Two brains are always better than one! You develop more ideas and gain different insights, perspectives, and approaches to saving.
It’s especially crucial for divorcees who are making financial decisions for themselves and their children but don’t have a companion with the same vested interest to bounce ideas off.
Through a series of questions, your financial advisor will take you through a retirement checkup, and an analysis of your goals and retirement funds so together you can make the best decision for continued retirement growth.
Financial advisors are always available to answer questions and guide your decisions.
6. Financial advisors provide objective advice and are not emotional when the market is volatile.
Let’s face it – money brings out the emotion in all of us. That’s because we work so hard to earn it.
Nobody wants to lose money, but it happens from time to time when you’re investing. A financial advisor can help you make decisions to minimize losses. He can’t prevent them or guarantee they won’t happen. However, he can talk you through a market decline and keep your emotions in check.
If you were an investor in the 2000s, think back to how you felt. Investors opened their 401-K statements and experienced breathtaking drops in their retirement accounts. In one month’s time, people saw significant declines. Emotions affected how people handled those drops.
When you’re dealing with money, you don’t want to make decisions based on emotion. You need to make rational choices that make the most sense in the long term. A financial advisor provides consistently objective and sound advice, no matter the personal, professional, or market circumstances.
A certified financial advisor can keep your emotions in check through the ups and downs, especially market volatility. They can prevent impulsive decisions when the market is volatile, and help you sustain long-term investment goals.
A financial advisor's steady guidance and emotional discipline provide clients with the peace of mind they need to achieve retirement goals.
7. Provide valuable investment software.
Organization is the most significant financial planning obstacle. If you’ve changed jobs over the years, you probably have investments in multiple accounts.
Financial advisors have access to software that can pull all your investments and create a one-stop shop to analyze their performance.
At Open Road Wealth Management, we put all your accounts in one place. With account aggregation, you can see your assets and liabilities in one place even if they’re held with different companies. You can also see how each account performs, and your overall investment portfolio.
We use a network of software and cutting-edge technology to guide your decisions.
Think of your advisor as your GPS that guides you along the open road. It uses data, like a GPS uses traffic reports, to guide you on the quickest path to your destination. Your financial advisor will guide down the right financial roads to reach your investment goals.
8. Saves you time.
Doing all these things - researching, staying on top of trends, adjusting to life factors and so on takes time. Wouldn't you rather spend that time dreaming of your retirement or spending time with your family Tap into the research, analysis, strategy, and insights of a trusted and experienced financial advisor.
When you interview your advisor, ask them how much they’ll do for you. They can do as much or as little as you need, within reason.
If you like to delegate tasks, a financial advisor is a perfect fit for you. You can give your advisor guidance, but leave the heavy lifting to the financial expert.
9. Navigate tax implications
Taxes now and during retirement should be considered when setting retirement goals and determining the types of investment vehicles. With some investment vehicles, you pay taxes now and others you pay taxes later.
A financial advisor can help you create a sustainable income stream that takes into consideration the types of accounts you have - various investment vehicles, Social Security, pension, Thrift Savings Plan (TSP), and investment withdraws.
They can also help you minimize tax liabilities. If you feel like you're paying too much in taxes, let's talk, and get the latest tax guide.
10. Help you reach your financial goals
It’s great to dream up financial goals, but they’re only valuable if you execute on them. Financial advisors suggest you update your goals every few years. What are your financial goals, and are you close to achieving them?
If you made financial goals five years ago, and you still have met them – it may be time to call in an expert.
Life changes, so it’s essential that you update your financial goals periodically. A financial advisor makes sure you hit the reset button to adjust for changes in your lifestyle, job, and family.
Finding a financial advisor
So, who do you trust? Friends and family members can help you find a financial advisor. If you know a friend or family member who puts their trust in a financial advisor and saw success, it might be time you do the same.
Interview several financial planners, and ask them these specific questions.
There are many times of advisors, each with its own specialty and set of qualifications and expertise. There's a certified financial advisor, fee-only, federal retirement expert, and wealth manager.
Have a conversation with your advisor about their qualifications, continuing training, and fees.
Remember that study? The cost of an advisor is usually offset by the gains you'll make in your investments.
Talk candidly with a potential advisor on their fees. Some retirement planning professionals make money off the investments they sell. Others, like a fee-only financial planner, are upfront about the fees associated with their services.
That way the advisor offers unbiased investment opportunities that fit your financial situation.
Open Road Wealth Management provides financial planning in the Kansas City area, both Missouri and Kansas and beyond. Are we a match? Let's find out.