What Does A Financial Advisor Really Do For You?

By Sean Condon, CFP^®

If you’ve never worked with a financial advisor before, you might be curious what all the buzz is about. Why pay someone to help manage your money when you can just do it yourself? Is there any added value in working with an advisor, or is it just an extra expense?

Let’s take a brief look at what a financial advisor really does, whom they can help, and why you should (or shouldn’t) work with one.

What Financial Advisors Do

The main purpose of a financial advisor is to help you build a personalized wealth-building strategy. The key word here is personalized. Financial advisors provide value because there is no such thing as a one-size-fits-all plan. With a personalized approach, an advisor can help you: 

1. Clarify your goals

2. Show you how to make progress 

3. Keep you accountable 

Understanding your goals, an advisor helps you identify where you are now financially and where you’d like to be. Then they create a custom plan to “bridge the gap.” But the big secret about working with an advisor is that financial planning is not about the plan, it is about the process.  

While everybody wants a clean, straight line between their current reality and their goals, life doesn’t work this way.  You may have a child, sell a business, or come upon unexpected expenses. Your situation is always changing and therefore your goals themselves may change. We all have our own financial blind spots – when situations change, a good advisor can help you spot them and make course corrections.

This ongoing relationship with an advisor will enable you to spend less time worrying about your money and more time focusing on what’s important to you and your family. 

Who Can an Advisor Help? 

There’s an old saying that the checkbook and the calendar don’t lie.  Show someone how you spend your money and how you spend your time and they will know what’s important to you.  

An advisor can help you save both money and time, leaving more time to pursue opportunities and enjoy the things you love.  Simply put, an advisor can help anyone who is looking to dedicate more of their time, energy, and skill to areas other than their personal finances.   

The degree to which you’ll benefit from an advisor’s guidance depends on the complexity of your situation.  If you own a company, have multiple income sources, invest in several portfolios (including company 401(k)’s), actively seek tax savings with a CPA and estate planner, then you are very likely to benefit. On the other end of the scale, if you are a young single professional renting your home, you have an easier task doing it yourself.  That said, even those with simpler finances can benefit from knowing if they’re on track to achieve their goals and what they need to change if they are not.  

Is An Advisor Really Necessary?

It is probably true that you can manage your own finances if you had the time, inclination and training.   But the fact is, most successful entrepreneurs and professionals simply don’t.  It’s also important to understand that investing isn’t all about skill.  It’s about emotion.  And it’s extremely hard for anyoneto maintain objectivity and not make emotional decisions about their own money.  

We attended a financial industry conference where the speaker asked how many people in the audience used a financial advisor.  Most hands in the room went up.  It was surprising on the surface: a room full of financial advisors, that many were working with a financial advisor.  What they realized however is that we all have financial blind spots, and by definition you can’t see your own.  

A financial advisor can get between you and that big mistake – be it budgeting/saving, investment decisions, or potential tax issues. Advisors can be objective, making it easy to call out behaviors that aren’t making sense. You want an advisor who  cares as much about your money as you do, and yet can provide an emotional distance to keep you focused, make good decisions, and stay on course. 

Portfolios Designed With Purpose  

Think of your cash flow and your portfolio as the engines that drive your financial plan. When you look under the hood of a car and you’ll see the orderly parts of a well-organized, synchronized machine.  However, if you look at the statements of most investor portfolios (and we do say this with experience), you’re likely to see a variety of holdings that might be called anything from a loose collection to a wild smorgasbord.  

This is understandable, as the investments we collect when managing our own money can come from a variety of sources: inheritance of a mutual fund, company stock from a rollover, several stock picks we read about in a book five years ago, etc.  The result is that many investors end up with a big pile of investments that don’t make any sense together.  

A financial advisor can help you correct this problem by using a disciplined process to build your portfolio.  In an intelligently designed portfolio, each piece works together on behalf of your goals.  It is designed on purpose. This fundamental aspect of financial planning can lead to real results.  Vanguard’s study Advisor Alpha[1] suggests that most clients of financial advisors can earn about 3% more than those without one based on the implementation of a disciplined process. 

Portfolio design is not the only area where a disciplined process can help you build wealth and reach your goals.  Spending and withdrawal strategies, tax management, portfolio rebalancing, behavior management, and strategic gifting, just to name a few, are all part of an integrated personal financial plan that provides value when working with an advisor.   

If you’d like to learn more about the benefits of working with an advisor, we at Windgate Wealth would be happy to chat. You can reach us by calling (844) 377-4963 or emailing windgate@windgatewealth.com. You can also book an appointment online here.