The Overlooked Benefits of Hiring Financial Advisors: How They Add Value Beyond Investments?

Financial planning can be a complex process to navigate. Every smart investor gives utmost importance to ‘return on investment’ and thinks pragmatically about money. While you may deny hiring a financial advisor considering the cost, certain life events may make you pause and think – is there a genuine need for hiring a financial advisor? Are there any hidden benefits beyond numbers and investment? 

The certified financial advisor’s fees must be seen as an investment, not as an expense. Investing in the best financial advisor has both tangible financial benefits and intangible or hidden personal benefits that can make your investment journey successful. While you may be aware of the services offered by wealth advisors, such as retirement planning, estate planning, tax planning, etc., and the tangible results they provide, not being aware of the hidden benefits is one of the main reasons for your dilemma in deciding whether to hire a financial advisor or not!

Tangible Benefits of Hiring a Financial Advisor

Tangible benefits of working with a certified financial advisor include:

• A good financial advisor is well-versed in their domain- long-term planning, tax planning, estate planning, debt management and more. They are updated on the recent developments in the market, trends, legislative changes, and new investment opportunities. Their financial knowledge and expertise help you pick the best investment that can outperform the market and optimize the return on your investment.

• A top-rated financial advisor creates a solid financial plan aligned to your investment goals, risk profile and time horizon to achieve various goals. They come up with investment strategies customised to your financial situation and needs. 

• The best personal financial advisor helps you build a diversified investment portfolio and manage risks with proactive strategies.

• A certified financial manager helps you navigate the dynamic market environment with optimal returns on investment by continuously reviewing, monitoring and adjusting your investment portfolio.

While these are the tangible benefits delivered by financial advisory services, investment advisors’ value cannot be quantified on them. 

Overlooked Benefits of Financial Advisors

Many tech-savvy investors believe they have a clear understanding of their financial situation and investment goals. They achieve financial wisdom on their own with some effort and time and may feel they can manage their finances independently without relying on professional financial advisory services. However, it is important to consider the often-overlooked benefits of financial advisors, which cannot be quantified and extend beyond investment performance. 

Here are some overlooked benefits of hiring a financial advisor:

• Behavioural coaching

A good financial advisor helps you in shaping your investor behaviour. Despite financial wisdom and understanding of financial goals, emotions can ruin your well-built financial plan. Here are a few examples

• During uncertain market conditions during the COVID-19 pandemic, many investors made investment decisions influenced by emotions like fear and panic. This included decisions like FOMO buying, panic selling of stocks, and following a herd rather than sticking to a disciplined investment strategy. In these situations, a rational perspective from a wealth advisor plays a crucial role in educating and counselling you to avoid emotion-driven decisions. 

• Major life events like health emergencies, marriage, divorce, inheritance, child adoption, layoffs, relocation, starting up a new business, etc., are accompanied by strong emotions. This can lead to emotion-influenced (greed, fear, panic) investment decisions, and the results can be uncertain. The financial advisor plays a vital role in these situations by giving a long-term perspective detached from emotions and making you understand the importance of a disciplined approach for a resilient portfolio. 

Major societal events or life events like these make you realise the overlooked benefits of investing in the best financial advisor. Here are some of the interesting data that supports this:

• As per the ‘Financial Priorities’ survey conducted by Ameriprise Financial Inc., nearly 83% of the respondents who have availed financial advisory services have confirmed the importance of working with financial advisors. Approximately 39% of investors who are not associated with any advisors believed working with an advisor could have helped them during the pandemic, and 30% of the participants started working with advisors.¹

• Vanguard, in its 2022 white paper ‘Putting a Value on Your Value: Qualifying Vanguard Advisor Alpha’, identified that a Vanguard investment advisor who follows a set of best practices ( including behavioural coaching) adds a lot of value for investors.^2,3
• Holistic Approach

A financial advisor has a holistic approach to financial planning when assessing your financial position and evaluating your goals to come up with a strategic plan for your investment journey ahead. From managing everyday financial needs, tax strategies, managing debt to long-term goals to leaving a legacy, focusing on the larger picture gives many benefits:

• A top investment advisor creates a personalised and comprehensive financial roadmap for you after deeply understanding your current financial situation, concerns, potential risks and future opportunities. They give you support throughout the financial journey. 

• Your portfolio is adaptable to your life events, keeping in mind your priorities with constant review. 

• A good wealth manager brings together the relevant professionals experienced in specific areas to address your situation-based complex planning needs. 

A global study by the Financial Planning Standards Board (FPSB) shows that working with a certified financial planner enhances the quality of life, resilience and financial confidence. Here are some interesting data from the study ⁴:

• Nearly 55% of people working with financial planners are highly satisfied with their wealth and 87% of them feel financially secure and tangibly better off. 

• Approximately 37% of unadvised investors identify improved financial well-being, and peace of mind and 36% of them identify greater wealth growth as the main benefit of seeking professional help. 

• Approximately 51% of investors working with financial planners have reported a positive influence on family life and mental health, and 73% of the clients experience health improvements. These data suggest the benefits of financial advice are more than money. 

Conclusion

To conclude, the best financial advisor knows you and your family thoroughly, understands your goals and works in your best interest to make your financial journey successful. Partnering with a professional financial advisor not only enhances your investment performance but also gives you behavioural and strategic guidance in your lifelong financial journey through holistic financial planning. 

Source

1. https://ir.ameriprise.com/news-events/news-releases/press-release/2021/The-Pandemic-Has-Shifted-Investors-Financial-Priorities-and-Sharpened-Their-Focus-on-Managing-Their-Money-Ameriprise-Financial-Study-Finds/default.aspx
2. https://advisors.vanguard.com/content/dam/fas/pdfs/IARCQAA.pdf
3. https://advisors.vanguard.com/insights/article/putting-a-value-on-your-value-quantifying-advisors-alpha
4. https://fpsb.org/news/financial-planning-leads-to-better-outcomes-beyond-wealth-but-myths-persist/