The Advisor Advantage Part 1 - Unveiling the Ongoing Value of Financial Advisors

Financial advisors face unique challenges when it comes to proving their worth. For example, when you pay a contractor to build a house, you receive a beautiful home. Or, if you swipe your credit card at a restaurant, you can enjoy a delicious meal. Financial advice, in comparison, isn’t tangible, and success in this industry cannot frequently be shown in 6 months to a year.

While financial advisors don’t build homes or cook 9-course meals, they provide meaningful daily value by helping clients achieve their financial, investing, and retirement goals. But how? Let’s look at the value of financial advisors, how they help clients beyond market numbers, and why they must balance transparency and client engagement.

The Unseen Work Behind the Scenes

The work of a financial advisor is complex, and most of it happens behind the scenes. Think of any athletic event, for example. The athletes are impressive during the game and showcase incredible talent with such ease, but the 2 hours of the game are nothing compared to the hundreds of hours of hard work off the field.

Financial advisors actively manage and rebalance investor portfolios to keep up with market changes. It’s no secret that markets are volatile, but with inflation and interest rates, advisors must constantly re-evaluate the assets in a client's portfolio.

Advisors must perfect a balance of detailed communication and client engagement. Going into expansive details about market moves can leave a client feeling confused and overwhelmed. However, clients need to know enough specifics to be confident about their choices and trust where their money is placed.

Advisors also have to address client forgetfulness over time. You likely don’t remember the allocation of your assets or why your portfolio is diversified the way it is—but your advisor needs to have all that information top of mind.

Client Education: Meeting the Survey Demands

Vanguard’s Advised Investor Insights discovered that client-relationship management is becoming equally, if not more, important than portfolio management. This need for relationship management directly relates to the increased interest in client education. Unfortunately, only 57% of American adults are financially literate, and 77% of Americans are financially anxious. 

Investors fear what they don’t understand, and the financial and investing industry is filled with complexities and differing opinions. With conflicting opinions from Google and social media ‘experts,’ it can be impossible to decipher what’s true and what’s not. Financial advisors can relieve the noise on the internet and lay out the pros and cons of investment endeavors so you can rest easy knowing your money is in good hands.

Key Emphases in Financial Advisory Value

While the value of financial advice and counseling may not be tangible, it’s indispensable. From asset allocation to personal finance tips, working with a financial advisor can instill perpetual confidence in investors’ decisions.

Let’s break down the wealth of value that financial advisors bring to their clients:

• Asset Allocation and Risk Profiling: Your advisor will prioritize what’s most important to you and create an investment strategy that aligns with your goals, values, and risk appetite. If you are approaching retirement, you may want to take on less risky investment opportunities to protect your portfolio. On the flip side, if you are in your early 30s and want to seek out life experiences, your advisor can create a plan that prioritizes adventure without sacrificing a retirement nest egg.

• Rebalancing: Advisors help investors maintain their preferred risk profile. Your desired level of risk may change over time, or market movement may impact your assets. Your financial advisor can adjust and rebalance your portfolio accordingly.

• Behavioral Coaching: Whether we like it or not, money impacts our entire lives—our emotions, thoughts, and well-being. Because of this, it’s easy to make rash decisions that can negatively impact your financial health during times of uncertainty. Your financial advisor can help instill discipline in turbulent times, knowing your finances are being handled.

• Tax Management Strategies: No one wants to pay more taxes than they have to. A financial advisor implements innovative tax-planning strategies to lower your potential tax bill and avoid potentially costly mistakes.

• Sustainable Withdrawal Planning: There’s nothing worse than saving for retirement for 30+ years only to drain your nest egg after a few years. Financial advisors ensure that you withdraw your savings at a sustainable rate, meaning that they set a percentage of your savings to take out every year so you don’t run out of money. Generally, advisors recommend withdrawing no more than ~4% of your savings, but advisors will also account for inflation yearly.

Beyond Investments: A Holistic Approach

Financial advisors offer so much more than just investing advice and planning. They offer a wide array of financial services including, but not limited to:

• Retirement planning

• College and education planning

• Insurance planning

• Tax planning strategies

• Estate planning

One of the biggest myths plaguing the financial industry is that advising is a ‘one-and-done’ role, but investments, tax management, and retirement planning require constant care and attention. Keeping in mind the market's volatility and evolving personal goals over time, keeping the same financial and investment strategy for life is unrealistic.

The Value of Peace of Mind 

Financial planning impacts our entire lives—how we think, how we act, and how we approach relationships. With a trusted financial advisor, you can feel confident in your finances, knowing that a professional is keeping tabs on the market so you can reach your goals.

If there’s one thing you can always count on, change is constant. Your lifestyle, goals, dreams, and finances change over time. But one thing that never changes is the need for financial security, and that’s where a financial advisor shows their true value.

Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, when sold, may be worth less or more than their original cost.