3 Good Reasons Why You Should Hire a Financial Advisor

There’s a significant number of people out there who are financially savvy. And it’s understandable some of those individuals disagree that hiring a financial advisor is beneficial. But there are many reasons why those people (and of course the less financially sophisticated folks) should hire a financial advisor. Keep reading to learn how a professional financial advisor can benefit you.

Before we dive into the information, let’s get one thing straight. As with any profession, there are some people who just aren’t good at what they do. So, when we discuss the value a financial advisor can bring to your personal financial situation, we’re talking about a financial advisor that is good at what they do and is a fiduciary that works in the best interest of the client.

The average advisor helps the average client increase returns

Industry studies estimate that professional financial advice can help the average client increase returns (after tax savings) by about three percent per year. That’s significant! Especially in a long-term setting. So, this data serves as the first reason why a financial advisor can benefit you.

A disinterested third party who is not emotionally tied to a financial situation is critical

Even if you are someone who can manage your own financial portfolio, hiring an unbiased third party who doesn’t have a stake in your finances is important for a couple of reasons:

A financial advisor is able to see the big picture. They can make unemotional and sound financial decisions unique to your personal situation. In fact, in that same Vanguard study, it showed that those who managed their own IRA and made even one material change to their strategy in a 5-year period, suffered an 8% plus decrease in performance. In my experience, this is probably due to making an emotional decision as opposed to a logical decision. Smart people are human and as such are prone to making emotional decisions just as often as anyone else.
A good financial advisor can help educate and coach you through many volatile situations. You may not have the time or temperament to do it yourself. If you have other more pressing things to do, spending the time to manage your own portfolio may take a back seat. In addition, there are many times you will need to make financial decisions without letting your emotions take control. Sometimes you may have the urge to do something, but the best decision you could make is to do nothing. In this case, your financial advisor can talk you out of doing something that has a negative impact on your portfolio.

Keep in mind, that many financial advisors also have financial advisors.

A financial advisor is crucial for the retirement years

As we grow older, financial advisors become more important for two reasons.

One, it’s a known fact that as we age our cognitive functions suffer. Therefore, as we grow older, we need to have someone watching over our shoulder to ensure we’re still making sound financial decisions. Or better yet, a financial advisor who is helping to make those decisions. This is especially important for the individuals who are financially savvy. Those people have been making their own day-to-day investment decisions. It’s always beneficial to have another person know your strategy so they can assist when the time comes.

The second reason has do with death. If two people are married and the individual who handles the finances passes away first, then the surviving spouse will need to start managing their financial situation. At this point, the person may not even know if the financial advisor they choose is even a good one. That type of circumstance is scary and unfortunate. And it’s easily prevented if you hire a financial advisor earlier in your life with whom you have a relationship.