Understanding the True Value of a Financial Advisor
It is no secret that some of the most successful people in the world work with financial advisors. They understand the value of tax planning, legacy, and risk management in their lives. They also place a huge significance on time and confidence, which allows them to be successful and focus on what is most important in their lives. In a world constantly focused on fees and costs, the value of a true family advisor has been lost in the translation. Because many advisors focus solely on investment advice, the emphasis has been placed on lower fees. Although returns are important, and an advisor should also help to get the most out of your portfolio given your comfort in risk, a true advisor drives back value in many other ways that can be measured directly.
1) Taxes – This is an area I feel is most often overlooked but can be one of the most important aspects of how an advisor should help. Tax planning from your advisor is different than a CPA and is not meant to be “table-topped” to explore efficiencies. A true advisor should help in this area in detail to assess current taxes and future taxation, helping to explore options now and throughout your living years to minimize total taxation over your lifetime. “Rule of thumb” advice in this arena should be avoided.
2) Security – Is there value in confidence? Why do most folks purchase a security system or buy insurance? An advisor can act as your financial security system, helping to provide support over your life, giving you the confidence in making the best decisions and that all angles are being addressed. This type of advice is invaluable and cannot be measured in numbers but is extremely important in a world of uncertainty.
3) Time – How much time do you spend working on your finances? If the answer is not clearly defined, I might suggest most folks are not spending the appropriate amount of time on their finances when they take on these projects on their own. On the flip side, if you are constantly focusing on your finances you may find this to be another full-time job. A financial advisor should help you save time to focus on what is important, by knowing they are exploring all angles and focusing on your finances when you may not be. Just last week I helped a client navigate a 56 page document that would have taken hours to go through. Due to my experience, I was able to help walk through this in 10 minutes saving the client hours of their time and feeling confident that the forms were completed correctly.
4) Legacy – Many folks would like to leave a legacy to their children or to charities but might be hesitant about the impacts to their own retirement or may not know the most effective way to make this happen while minimizing the potential taxation. We work in great detail with our clients to develop a thoughtful plan to be sure their retirement is secure but also to maximize their gifting strategies and what may be left to their beneficiaries or organizations they are closest to. An estate planning attorney often is needed here when it comes to drafting documents, but a financial planner can be very strategic in this arena to outline different options to make your wishes come true.
5) Risks – Emergencies, lawsuits, fraud…. These are all risks that can have huge impacts to your financial well-being and typically we find the more you have, the more of a target you may be. Understanding all risks that can occur and ways to mitigate these risks or prepare for them is critical in your plans long term success.
6) Major life decisions – We face a significant number of major decisions over the course of our lives. Whether that be selling a business, investment choices, when to retire, etc. as a financial planner we find we are typically the cornerstone for our clients during these difficult times. Although these decisions may not come up every year, working with an advisor provides a relationship to you so that when life comes your way, you are able to work with a trusted advisor to help make the best decision possible.
Planning is an extremely complex part of our lives. Not everyone needs a full-blown financial planning relationship, but if you find yourself connecting with any of the areas mentioned above, you may want to consider your options. Although our goal is to help simplify these complex waters, it is critical to fully understand pros and cons to all aspects of financial decisions through life, and a true planner should be there to help you with this. Most of what we do is very easily measured allowing you to see the value driven back in a very clear way, but a huge part of working with an advisor is also intangible. It’s no coincidence that most successful families and businesses on this planet work with advisors, and when the advisor addresses all six of these areas you will begin to see significant value drive back to you in many forms.