Is A Financial Advisor Worth It?

One of the most common questions that we are tasked with answering is "Is a Financial Advisor worth it?"  

These days, with the rise of artificial intelligence, investment opportunities just a few taps away, and 401k plans with automatic investment options, this is a very fair question that many people are pondering in their own lives. As with many things in life, the answer really is "it depends". We don’t say this as a cop-out, so the goal here is to help you decide for yourself - do you need a Financial Advisor, and if so, what should you look for?  

What do you need?  

First, we have to answer the question, what do you need? For many people, asking this question alone causes them to start the search for an Advisor, because many people don't actually know what it is in fact that they need.  

Let's think about this a different way - when you are getting groceries for the week, what are some of the first things you do? If you are anything like me, you probably look into your fridge, realize that your milk expired 2 weeks ago, and start to take an inventory of what you have. After that, you start thinking about what you would like to eat this week, what needs to be replenished, and if there is anything else you might need that you don’t normally buy.   

So, in summary, we:  

1. Understand what we are already working with and how these items can be incorporated into our plan this week.  

2. Identify our goals for the week, things that need fixing/replenishment, etc.  

3. Add these to our list to address & tackle.  

4. Go to the store, or on our favorite delivery app, and order the items to meet our goals.  

5. Rinse & repeat the week following.  

Financial Planning is not that different - it just gets a lot more complicated. 

With Financial Planning, the process is the same - but the options are more complicated and have much larger stakes associated with them. Here are just a few of the laundry list of things that are necessary to have a fully-functioning financial plan:  

1. Investment Allocation 

2. Cost Strategy 

3. Rebalancing Strategy 

4. Tax-Strategy 

5. Reallocation Strategy based on age & economic events 

6. Identifying new options & weighing the benefit to your portfolio 

7. Savings Strategy 

8. Savings Rate (Am I saving enough?) 

9. Savings Tax-Allocation (How are my savings being taxed now & in the future) 

10. Opportunity Considerations (401k match, bank incentives, financing incentives) 

11. Debt-planning 

12. Life Goal Planning 

13. Having a baby 

14. Retirement Age 

15. How much should I account for inflation / medical bills / what will stuff cost in 30 years?  

16. What is Long Term Care, and how do I plan for it? 

17. Estate Planning 

18. Avoiding Probate 

19. Minimizing Estate Taxes 

20. Charitable Gifts 

21. What happens if my spouse dies prematurely?  

All this and much more are "items" that we need to be addressing & finding solutions for as we navigate through our lives. You don’t necessarily need a Financial Advisor to help you tackle these, but just like your weekly grocery run, each item on this list costs you time, money & stress.  

What do Financial Advisors actually do for you?  

The first thing to address is that there are a variety of Financial Advisors - some more helpful than others. For the context of this article, we will talk about what your advisor should be doing.  

The list above certainly describes a lot of the practical ways a Financial Advisor can help you. Below are some of the mannerisms your advisor should be operating with.  

The first thing? Listening. 

In the same way that you need to understand what you need before you go to the grocery store, your advisor should understand what you need & want out of your finances and ultimately your life. If they are pitching a product or a solution in the first meeting with you, they are probably not really understanding what you need.  

Second to this is asking thought-provoking questions.  

Part of learning what you need & want out of life is asking questions that aren't always the easiest to answer, but necessary to align your values & strategy. 

Questions like:  

• Is saving for your kids college or your retirement more important to you?  

• Are you comfortable with working an extra 2 years before retirement in order to afford better vacations?  

• Are you wanting to plan for Long Term Care, or are you expecting your children to help when your health starts declining?  

Third, they should be researching and presenting multiple solutions to you, and walking you through the pros and cons of each.  

Most people don’t know this, but with financial planning, there is more than one way to "skin a cat". Each comes with its one pro's and cons, and your Advisor should be sharing insight about all of it, and helping you decide what is best for you. 

Lastly, they should be updating you on how the plan is going and making adjustments when necessary.  

Reviews & adjustments are the most important part of your financial plan. Just like with groceries, you can survive your whole life off one grocery list. Your life is going to change & so will your needs. Your Advisor should be reconnecting with you at a minimum annually - but should be reaching out 2-3 times per year, depending on the planning you have done with them.  

Your Financial Advisor should be your Advocate. This means that they should not just be working for you, they should be advancing the causes that you have hired them to do to the best of their ability. If they are not doing that, there are plenty of other Fiduciary Advisors who will. 

So, Is a Financial Advisor worth it? If you are someone who loves to research new funds, nerds out on changing tax laws, are emotionally disciplined enough to not sell when the market is in crisis, and has the time and energy to maintain this - then maybe they are not worth it for you, and that is ok. We get that and are not going to convince you otherwise.  

But, if you are someone who has a vision of leaving work & being present at home, using weekends for fun & adventure rather than updating your Excel spreadsheet again, and partnering with a team that has the tools & resources to bring order & peace in these areas - then let's talk.  

Imagine sitting on your couch at night, dropping your shoulders, and breathing a sigh of relief knowing that you have an Advocate working for you.  

That’s Providence Capital's vision for all of our clients. We hope you can experience this too.