Discover the extra value that human advisors offer your portfolio.
If the rise of robo-advisors has you wondering, “why should I hire a financial advisor when I can use an investment app?”, it’s time to look at the extra value that human advisors provide.
While a computer program can only offer investment advice, working with a financial advisor produces a wide range of financial, behavioral, and emotional benefits. A recent survey found that individuals who work with a financial professional tend to contribute more to their retirement accounts, have higher account balances, and have more confidence in their financial decisions.
AXA US surveyed more than a thousand U.S. K-12 educators in 2018, examining the differences between those who worked with a financial advisor and those who managed their money on their own. The study was unique because it involved 20 different financial institutions, and there were no significant differences in age, gender, or income between the two groups. This delivered a clear view of the value of working with a financial advisor, rather than the performance of a particular portfolio. The results showed that those who hired a financial advisor demonstrated:
- wiser investing behaviors
- significantly better financial outcomes
- increased confidence about financial decisions
- emotional benefits including greater satisfaction
Credit: Northwestern Mutual
Why should I hire a financial advisor?
A financial advisor can create a plan that improves every area of your finances
A financial advisor will help you with every aspect of your finances, including legacy planning, eliminating debt, and retirement strategies. In a time when Americans feel increasingly anxious about money, it’s noteworthy that AXA’s study found that those who met with a financial advisor at least once a year felt more confidence in their investment choices. A Schwab study found those with a written financial plan made wiser decisions in many areas of their finances.
Credit: Charles Schwab
Is it worth it to hire a financial advisor if I’m not wealthy?
A financial advisor helps you develop behaviors that lead to wealth
Instead of simply offering investment advice, a financial advisor serves as a behavioral coach. We help you to develop smart financial habits that effectively increase your wealth. AXA’s study found that educators who worked with a financial advisor exhibited effective financial behaviors, and had nearly twice the amount in retirement savings as those who invested on their own. More than half (56%) of those who worked with a financial advisor started contributing to their retirement accounts sooner. They also contributed 49% more to their plans each year, and increased their contributions 24% more frequently than those who chose to go it alone.
Do I need a financial planner if I’m just starting my career?
The benefits of working with a financial planner multiply over time
Working with a financial planner is like working out physically - the benefits build on each other over time. Because of the way that compound interest works, if you start saving around $500 a month in your mid-twenties you could retire with $1 million in savings. You would have to put away nearly $1k each month to achieve the same amount if you wait until age 35. AXA’s survey found that those who worked with a financial professional for more than 5 years had a median account balance of $57.6k compared to just $21k for those who worked with an advisor for fewer years.
Credit: Business Insider/Andy Kiersz
How does paying for a financial advisor pay off?
Working with a financial advisor increases your portfolio value
According to Fidelity, industry studies show that working with that a financial advisor can add between 1.5% and 4% to the value of your portfolio over the long term. And a recent whitepaper by Vanguard estimates that working with an advisor can help you realize a net increase of 3%, once you pay the 1% that most advisors charge. That can add up significantly over time.
Keywords:Why hire a financial advisor, is it worth it to hire a financial advisor, do I need a financial planner
Matt Logan Inc. is an independent firm with Securities offered through Summit Brokerage Services, Inc., Member FINRA, SIPC. Advisory services offered through Summit Financial Group Inc., a Registered Investment Advisor. Summit Brokerage Services, Inc., its affiliates and Matt Logan Inc. do not give tax or legal advice. You should consult an experienced professional regarding the tax consequences of a specific transaction. These are the views of Matt Logan Inc, and not necessarily those of Summit Brokerage Services, Inc. and any of its affiliates and should not be construed as investment advice.