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Setting emotions aside

Behavioral coaching is one of the most valuable things a financial advisor can offer. A good advisor will help you establish sustainable financial behaviors and work with you to set a financial plan you can easily stick to.

The key goal is to start building sustainable wealth-building habits, says Kellen Thayer, a financial advisor with Advisor.com, an online platform that connects people with wealth experts.

“People often say they will start investing tomorrow, but tomorrow never arrives. A financial advisor can be the accountability partner they need to ensure they don't put off what they know they should be doing until it's too late,” he says.

“It's akin to your physical health; you will always be better off starting today than avoiding addressing it altogether.”

There can be real consequences to putting off planning for retirement. Instead of basking in your golden years, you may have to pick up a part-time job to bring in extra income. Around 20% of American retirees have already come out of retirement and rejoined the workforce, according to a 2023 study by T. Rowe Price.

A good financial advisor can help calm the negative emotions that crop up during financial planning. They do this by “working with you to co-develop a plan with clear, measurable time-bound goals,” Thayer says. “When volatility rises – like in 2008, 2020, or 2022 – good advisors will be there to remind you of your goals and can help you take advantage of market pullbacks to add to your portfolio at deep discounts.”

This is what sets financial advisors apart from robo-advisors. You can’t get the same personal connection and customization with an algorithm as you can with another human. When you get matched with a financial advisor through Advisor.com, you can schedule a free consultation call to discuss your financial goals and see if you have a good rapport.

This relationship is meant to last over the long haul – years, even decades – with your advisor accompanying you on each phase of your financial journey.

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Investments tailored to you

The best way to allocate assets depends on an investor’s financial situation, risk tolerance and time horizon. A good financial advisor prioritizes time-tested investment strategies but tailors them to your individual needs.

“Asset location is just as important as asset allocation. Effectively waterfalling funds into specific accounts to optimize the tax benefits of each is vitally important,” Thayer says. That means finding ways to invest your money that saves on fees and taxes.

One tactic could be to max out an employer-sponsored 401(k) before putting savings into a taxable brokerage account. Or it could mean finding the right allocation strategy of stocks and bonds customized for your risk appetite and long- and short-term goals.

When you first consult a professional advisor, it should be a low-stakes conversation where you can get to know each other. The advisor will ask you a few questions about your current financial reality, but it’s really a chance for you to get to know them and what they can do for you.

“It usually boils down to three questions: Do I like you? Do I trust you? Do I want to do business with you?” Thayer says.

“If you answer ‘no’ to any of these questions, then you should keep interviewing advisors until you get the perfect match.”

Cutting back on fees

When tackling investing on your own, it’s easy to miss hidden costs. A good financial advisor can implement a cost-effective portfolio to minimize these costs and maximize overall returns.

Research by Morningstar has shown that low costs are associated with better investment performance. It’s simple math: when you pay less in fund expenses, you get to keep more of the returns regardless of how the market is doing.

“It’s not what you make, it’s what you keep,” Thayer says. “Advisors help you develop a plan, stick to it, and can help you to avoid costly mistakes that may exceed any fees you pay them over the long term.”

A good financial advisor will help you look for investment opportunities that offer low costs and don’t charge hidden fees. Depending on the size of your portfolio, professionals found through Advisor.com charge clients through a flat fee or a percentage of assets under management. Both methods are presented upfront, so you know what to expect.

After working hard for years, everyone deserves a comfortable retirement. To ensure you’re building the most wealth possible for your golden years, you should consider consulting an expert who will keep your best interests in mind when helping you plan for each stage of your financial journey.

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Starting portfolio value of $50,000 with an income of $100,000. Assuming a 20% annual savings rate with a 3% increase in income annually for 25 years, then 1% increase annually for the last 5 years. Without Advisor illustrates a 5% rate of return while with an advisor illustrates an 8% rate of return. This example is for illustrative purposes only and is not a guarantee. The hypothetical 3% net value add for professional financial advice is based on the Vanguard whitepaper "Putting a value on your value: Quantifying Advisor's Alpha". Please read the methodologies used in the paper. The value of professional advisement varies by client and portfolio. Please perform your own due diligence before choosing an investment advisor.

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Em Norton Staff Writer

Em Norton is a Staff Writer for Moneywise. Em holds a B.A. in Professional Writing from York University and has been writing professionally since 2019. Em's work has previously been published by Room Magazine, IN Magazine, Our Canada and more.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.