What Do Financial Advisors Do? Do I Need a Financial Advisor?
The best financial advisors offer many benefits to their clients. However, many of us think that they only provide advice on investments to really wealthy people.
Here are 6 things that financial advisors do to benefit clients of all levels of wealth.
1) What Do Financial Advisors Do? They Boost Your Retirement Savings — Dramatically
Boomers working with a financial advisor are more likely to have savings for retirement and are more likely to have set a retirement savings goal, according to the Insured Retirement Institute (IRI) “Boomer Expectations for Retirement 2014” report.
Another survey from the Voya (formerly ING) Institute for Retirement Research reports:
- “Individuals who spent at least some time working with a financial advisor have saved, on average, more than twice the amount for retirement than those who report no time.”
- “That gap jumps to more than triple for those who report spending a lot of time with an advisor as compared to those who did not.”
With the current retirement crisis of more than 50 percent of boomers not having enough savings, this is reason enough to find a financial adivsor today. However, there are many other compelling reasons to use a financial planner.
Research shows working with a financial advisor increases savings.
2) What Do Financial Advisors Do? They Boost Your Confidence
This recent study actually shows this boost in confidence among baby boomers who work with a financial planner in its survey of boomers on the topic.
In fact, the percentage of Boomers working with a financial advisor who are highly confident in having sufficient savings to live comfortably throughout their retirement years is more than twice that of Boomers who are planning for retirement on their own, IRI data show.
IRI notes that 53% of Boomers working with an advisor report confidence in retirement expectations versus the 21% of Boomers without an advisor who report the same.
Learn more in “Baby Boomers Can Boost Retirement Confidence with One Easy Step.”
3) What Do Financial Advisors Do? They Increase Retirement Planning Behaviors
The same IRI study mentioned above also found that: “Professional advice has a positive influence on other retirement planning behaviors including:
- Increased usage of tax-advantaged savings vehicles
- Improved asset allocation
- Greater portfolio diversification.”
4) What Do Financial Advisors Do? They Get You to Act and Stop Procrastinating Your Retirement Plan
Just like a regular checkup with your doctor or dentist can spark you to take better care of your health, meeting regularly with your financial advisor is proven to get you to take actions for the health of your finances.
When you meet with a financial advisor:
- You are forced to look at your finances
- You get support for taking actions to improve your financial plans
- You have a sounding board for setting goals
5) What Do Financial Advisors Do? They Offer Expertise
You pay a doctor to help you manage your health. You hire a plumber to unclog the pipes in your house. You send your kids to school for an education from qualified teachers.
We all use experts for various things in our lives.
A financial advisor is an expert in personal finance. They offer expertise in financial and retirement planning to help you make the most of your financial resources.
Sure you can read all kinds of articles and have some knowledge of personal finance, but financial advisors are experts in this field. You might think of them as a doctor for your short and long term financial health.
“I’ve devoted over 2000 hours a year for 10 years to understanding, analyzing and managing personal finance issues. Compare that to what you can devote to the cause on top of your day job, family and life commitments,” wrote John Buerger, CFP, MSFS on a finance forum.
Financial expertise improves your retirement plan
6) What Do Financial Advisors Do? They Help You to Act Rationally
Human beings are not naturally programmed to manage money — especially our own. The Center for Retirement Research at Boston College has an interesting interactive video that educates users on “Curious Behaviors that Can Ruin Your Retirement.”
According to research, our brains are wired to:
- Not care very much about our future selves. Very few of us are good at delaying gratification — this is one of the reasons that saving for retirement is so difficult.
- Ignore some numbers that really matter. Little numbers like return on investments, interest charges and inflation rates can make big differences on our financial well being.
- Focus on the past. With investments, we tend to focus too much on profits and losses in the past, not how to improve going forward.
- Be optimistic and avoid unpleasant thoughts. Our brains believe that positive things are more likely to happen than negative. This makes it difficult for us to plan for things like long term care, a big medical event or run away inflation.
Given these facts about how we work, no wonder retirement planning is so difficult.
One of the biggest benefits of using a financial advisor is that they can help you think and act more rationally and overcome our natural instincts. They can advise you on the best practices and help you make rational decisions for your future.
Do I Need a Financial Advisor?
The answer is likely yes. The benefits are pretty overwhelming.
If you are not ready to talk with a financial advisor today, maybe get started with a retirement calculator. The NewRetirement Retirement Calculator can act like a virtual financial advisor and help you feel more educated about your retirement plan and maybe provide a foundation for a great conversation with an actual advisor.