Want a house? A car? A boat? Or even more money at the end of the month? Achieving this is quite difficult, if not impossible for some people to do on their own. But could a financial advisor help them achieve their goals? 

I’m not sure if there has ever been a person who when they were in their teenage to early college years, didn’t think about one day attaining some amazing milestone with their money. Whether that was an expensive car, a vacation around the world or a dream home, most people as they age and experience life put that into the backburner and turn that goal into a pipe dream.

Inundated with bills, inflation and a ton of other things that one could experience throughout life, what once seemed like a goal sometimes falls off the mark and becomes something that becomes more of a pipe dream.

This is especially true for people who have dabbled with investing without the financial literacy of exactly how to do it, and ended up losing money.

It becomes quite frustrating and a lot of people do not know how to go out there and achieve their dreams anymore, and it makes for a sad picture when we look at the outlook of some people’s outlook of their future lives.

Yet, it doesn’t have to be that way. There are ways to get out of debt. There are ways to get your money to actually work for you. And you don’t have to go at it alone. These things could actually be attainable, yet most people aren’t sitting down with the people that they need to be speaking with, because the overall perception of working with a financial advisor is that you may need millions of dollars before they even entertain a meeting with you, but that isn’t true. Almost all initial meetings with a financial advisor are free, and some may charge a fee as low as $10 to start up something like a retirement plan for you. 

If you’re anything like us… Then you’ve probably come to realize…

Attempting to add finance and investment to your skill set and your set of day-to-day tasks can be excessively stressful and time-consuming when you’ve already got responsibilities like work and parenting, outside hobbies and interests and probably lots more on your plate. If this is the case, hiring a financial advisor can be a panacea that not only makes your life easier but also helps you make better financial decisions and ultimately reach your financial goals.

Curious how hiring a financial advisor might benefit you? If you’re already busy with life responsibilities, and the thought of adding investment management to your list of responsibilities sounds utterly daunting, we can’t blame you. Hiring a financial advisor allows you to outsource many of those responsibilities (and hours of effort, and stressors) to a professional who has the expertise required to do a truly great job.

I mean let’s face it. You decided upon your line of work or career because you’re great at what you do there. If you have a family or children, then you could be doing great there as well. However, to be great at multiple things, including both the management and the growth of your money, is a challenge that not many people are able to do on their own. 

Figuring Out Your Finances On Your Own Can Be Overwhelming

Self-Managed Finances Can Cause Unnecessary Stress

When it comes to an area like your finances, the stakes are especially high, especially when fear or greed kicks in. There’s no doubt that you want your investments to do well, and in general, you want to ensure that you’re making smart financial choices that help you consistently progress toward your goals. The fact that the stakes are so high can be a particular problem when you’re managing your money all on your own, or perhaps in tandem with your spouse – it puts a lot of pressure on you, adding unnecessary stress to your life. 

An additional source of stress when it comes to investment is the inherently up-and-down nature of the market. Without the guidance of a seasoned expert who understands the “long game” of investment, every time your investments decline in value, you might find your blood pressure values going in the opposite direction. No matter how savvy your investment choices, the market’s constant ups and downs never really end, and at this point it’s common knowledge that chronic stressors are never good for you – so this is another reason you might reasonably choose to outsource your financial responsibilities.  

Managing Your Own Finances Can Also Take Up Lots of Extra Time

In addition to the stress it causes, there’s no denying that managing your finances can also take up a significant amount of your time. If you’re busy with important obligations and responsibilities like your job, family/children, and whatever other priorities are on your plate, it’s very likely that time is already a precious and scarce resource for you.

In addition, not only do you have to spend the time actually involved in day-to-day money management, if you don’t have any finance-specific education you’ll also have to invest a fair amount of time in learning about how to make smart financial and investment choices. Finance is a complex, detailed, highly specialized area, with the best professionals constantly educating themselves to keep up with the latest developments in the field (such as changing tax laws, or the most lucrative and beneficial new financial products). You might not have the extra time required to intensively educate yourself to make good decisions in this area – or, even if you do have enough extra time, you might not want to spend your valuable free time on these kinds of tasks.

How a Financial Advisor Can Help

Hiring a financial advisor means gaining the well-informed external perspective of an expert. When you hire an advisor, you should start by giving them an idea of your financial goals (and, by extension, your life goals). From there, they work with you to create a plan to achieve those goals while building your overall wealth. Naturally, a financial advisor should know more about the subject than you and should be better at putting their recommendations into practice than you are. They have the expertise to help you set clear, realistic objectives – and, just as importantly, to paint a clear, realistic roadmap that’ll get you there. 

Advisors Help You Both in the Now and in the Future

Financial advisors help with investments and do focus on your long-term goals (potentially decades in the future), but their advice also provides plenty of immediate benefits, too. Their advice is a combination of present- and future-oriented so that you receive truly comprehensive financial support. 

One of the most important and immediately relevant services that financial advisors provide is helping you to create a financial plan or a budget. This allows you to start getting your present financial situation in order, saving more, and making smarter choices regarding your money right away. They can help you determine your short- and long-term financial goals, get a sense of your present financial situation to identify where there’s room for improvement and help you tackle any urgent debts that are impacting your credit and/or accumulating interest to cost you more over time.

A Financial Advisor Can Help You Achieve 3 Percent (Or More) in Net Returns 

On top of minimizing your stress levels and maximizing your free time, good financial advice also adds concrete, measurable value to your portfolio. A 2019 report from the experts at Vanguard found that working with a financial advisor can help you achieve about 3 percent more in net returns. This amount might seem relatively modest, but it adds up exponentially over the years. 

Let’s say you were planning to invest $10,000. Without a financial advisor, let’s say you have an average annual rate of return (ROI) on your investments of about 10 percent. This would mean that the first year you invested, your money would increase by $1,000, leaving you with a total of $11,000. Then, if you kept investing that money as it grew with the same ROI of 10 percent each year, here’s how it would grow:

• After 5 years: $16,105
• After 10 years: $25,937
• After 20 years: $67,275
• After 30 years: $158,630

Compare that to how much more your investments could grow with the additional 3 percent of returns that advisors can help you achieve (13 percent total, in our example). In the first year, your initial $10,000 would increase by $1,300, leaving you with $11,300. Here’s how you could expect it to grow with a 13-percent ROI each year:

• After 5 years: $18,424
• After 10 years: $33,945
• After 20 years: $115,228
• After 30 years: $391,149

That 3 percent adds up to an enormous difference after 20 years ($47,953 more, to be exact) and even more after 30 years (a whopping $232,519 more). And these are conservative estimates based on a situation where you’re only investing an initial $10,000 plus the additional returns you get on it each year. Considering its proven and measurable benefits, it’s clear that investment advice is a worthwhile investment in itself.

“Some people who are more creative in nature just aren’t that great when it comes to managing their money, or making it turn into more money,” says Leonard Kim of AdvisorCheck. “While this example may list someone who is savvy with their finances getting a 10 percent return, someone who is much less savvy could easily be generating losses instead of a profit. So while someone who is savvy is getting 3 percent more in returns, someone who doesn’t understand the markets could be generating a much more significant return than what they could ultimately lose in the markets on their own,” Leonard continued. 

These benefits could potentially even be much greater – it really depends on how well you’re able to do on your own, without professional advice. For instance, if you have minimal financial savvy and lack the in-depth knowledge needed to consistently make smart investment choices, hiring a financial advisor could realistically add quite a bit more value than 3 percent to your portfolio. One study also showed that “households working with a financial planner were found to be making the best overall financial decisions,” accounting for “portfolio risk level, savings habits, life insurance coverage, revolving credit card balances, and emergency savings” as the study’s main metrics.

A Financial Advisor Can Keep You On Track with Your Goals Despite Distractions

A Forbes article on this subject also notes that financial advisors can keep you from getting distracted and making poor investment choices: “Life presents many distractions that can lure you into regrettable financial decisions. A neighbor's hot stock tips or a braggy friend's showy lifestyle, for example, can push you into spending or investing where you shouldn't. A good advisor helps you avoid those financial detours — usually by showing you what's possible financially if you stick to your plan.” Simply sticking to a consistent plan for years at a time can be challenging, and many of us could use all the help we can get in this area.

When you hire a financial advisor, part of the service you’re paying for is help in executing your financial plan. It could very well be that you have the financial knowledge to make good decisions, but your emotions might undermine your ability to make consistently smart choices. If this is the case, an advisor’s guidance – informed by a track record of experience and success – can ensure that your emotions don’t interfere with making disciplined investment decisions.

With a financial advisor on your side, you’ll be empowered to potentially achieve your top goals much sooner than you might otherwise have. These kinds of life/financial goals can include:

• Buying a house
• Putting your kids through college
• Buying a boat
• Taking a year-long vacation
• Finally paying off your student loan debt
• Retiring early

It’s fair to say that if a financial advisor’s guidance can help you achieve your goals potentially years sooner than you would’ve been able to do on your own, then they’re effectively altering the trajectory of your life – and definitely altering it for the better. 

Financial Advisors Also Help With Liability

Imagine someone told you about an extremely risky investment and you decided to put all your eggs into one basket and move forward with it. Then you lost all your money in that risky investment.

What would happen?

Chances are that your spouse will probably leave you. You may have to file for bankruptcy. Your life could completely fall apart. And there’s only one person to blame in the entirety of this situation. Yourself (or your spouse who did this).

Your financial advisor doesn’t want that to happen. They would rather carry the blame as opposed to giving you that burden. But first, they wouldn’t make any risky type of financial maneuver like that, if they are truly a fiduciary who is looking out for your best interest.

However, if things do go wrong and they do end up losing some money, it won’t be your fault. It would be theirs.

That liability no longer lies upon your shoulders. And considering how difficult it is for most people to generate a return on their own without losing money in the stock market, that’s a huge burden to be uplifted off of someone.

Instead, that burden is on the shoulders of the financial advisor. And you have choices of what you can do, depending on the nature of the offense. You could fire them, blame them or (if worse comes to worse and they make a harmful legal transgression) sue them. On the other hand, if you make a mistake on your own, you’re the only person who can be blamed for that mistake. And spouses or family members may not take too kindly on that kind of mistake being made by someone in their own household.

What Other Areas Can a Financial Advisor Help You With?

Financial advisors can have expertise in one area, or in several different areas – here’s exactly what they can help you with:

Investment

Many financial advisors hold investment expertise that allows them to guide you toward the smartest investments for your specific situation and weigh the risks involved in particular investments. They can also help you play the “long game” and stay on track with your goals, even during periods when your investments decline in value – when you might otherwise be tempted to suddenly switch tactics. 

Education Planning

Need to save up for a college fund, or perhaps even more than one? College is definitely not cheap, so the thought might have you feeling a bit daunted, but not to worry – advisors can help! They can assist you in analyzing your savings needs and savings options, guide you through the confusing maze that is financial aid, come up with strategies surrounding gifts and income tax and direct you toward the best vehicles for financing education. They can also help you figure out how you can cut down on education costs for your children, if you’re presently paying for their schooling (including but not limited to college), providing you with even more immediate benefits.

Tax Planning

Attempting to understand anything as complicated as our tax system can be incredibly confusing and overwhelming. A financial advisor can use their tax-related knowledge not only to translate complex tax laws into terms that a layperson can understand, but also to help you make financial decisions that help you pay less in taxes (e.g. by highlighting lucrative tax breaks/deductions that you might want to take advantage of). Their advice extends to the basics of tax law and calculations, how taxes apply to businesses, trusts, property transactions and estates, how to reduce and manage liabilities and how to conduct your charitable giving optimally. 

They can also cut down immediate tax liabilities for the instant benefit of greater tax savings. For instance, imagine if your advisor was able to find you a tax break in the five-figure range (a situation that’s not unheard of!) – saving that much money on taxes could be hugely helpful in accelerating your progress toward your financial goals. 

Retirement Planning

Financial advisors have the knowledge to assist you in planning for retirement years or decades in advance, helping you establish how much to save up for your post-retirement cost of living. They can also guide you in how to use your tax-advantaged retirement accounts (e.g. IRAs, 401(k)s) as effectively as possible to achieve your goals.

Estate and End-of-Life Planning

If you require more complex estate planning than the basics of writing a will and choosing a life insurance policy, financial advisors with specific expertise here will be a huge help. You can seek out their advice to establish an estate plan that’s in line with you and your family’s wishes. 

As an example, imagine the peace of mind you could achieve knowing that when you pass away, your dependents/beneficiaries – very likely the people you love and care about the most in the world – won’t have to worry about finances because you put time into careful estate planning with professional guidance, and they will now be receiving a large six-figure check. 

Continuity is another significant benefit of working with an advisor to manage estate/end-of-life planning. For instance, let’s say you are married and are the relationship’s primary money manager. If something happens to you and you lack good records/proper documentation of your shared finances, your spouse will have to deal with the repercussions. In this situation and many others, hiring a professional provides important continuity for the surviving spouse or other family members.

Before hiring an advisor, if specific areas of your finances like investment or estate planning are especially important to you, make sure to ask them about their areas of expertise to confirm that they line up with your needs.

What Can You Expect When You Hire a Financial Advisor?

If hiring a financial advisor is starting to sound more and more appealing, you may be wondering what to expect when you first start meeting with your new advisor. This will vary depending on the advisor, their area(s) of expertise, and the kinds of goals you’re hoping to set with their help, but in general you can expect the following as they begin advising you, writes Forbes:

• Fact-finding: The advisor establishes your financial background and goals.
• Understanding: If anything about your background or goals is unclear, the advisor clears up those points of confusion.
• Evaluation: The advisor helps you understand whether or not your goals are likely to be achievable and lets you know how you can expect to achieve them.
• Risk assessment/management: Your financial plan should account for the important concern of risk management (e.g. advising you to deal with the elevated risk of high credit card balances).
• Planning: Coming up with a personalized financial plan is the most important part of working with a financial advisor (plans can address your investment portfolio, tax planning, insurance recommendations, etc.).
• Implementation (sometimes): Some advisors will offer assistance as you put their plan into practice (e.g. by purchasing beneficial financial assets on your behalf).

Different financial advisors can follow different processes to do their job, but the steps listed above are some of the essentials that you can expect from an advisor.

The Best Way to Find a Trustworthy Financial Advisor

Now that you know exactly how having the guidance of an advisor can benefit you, you may have decided that it’s time to hire a financial professional. Taking this step can help to remove a potentially significant source of stress from your life and ensure your finances and investments are consistently well-managed.

If you’re looking for a financial advisor, we’d bet that you’re probably concerned about finding someone reliable to take on the significant responsibility of managing your money. That’s understandable – hiring a financial advisor is a major decision that some people make mistakes on. 

How can you locate prospective advisors and then check up on their backgrounds to make sure you hire someone you can trust? The AdvisorCheck database is by far the most effective tool for this important task. Using AdvisorCheck, you can reliably differentiate between financial advisors with clear professional records and those who might have a history of poor decision making or even dishonesty. 

AdvisorCheck grants you instant access to in-depth background checks on the financial advisors you’re considering hiring, helping you achieve the peace of mind needed to comfortably take that next step and hire someone. Creating an AdvisorCheck account is free, and using the site allows you to access info that you might not even have known was available, pulling its data from an aggregated network of independent, reliable sources. With a total of more than 388,000 Investment Advisor Representatives (IARs) and more than 629,000 Registered Representatives (RRs) listed in the AdvisorCheck database, any advisors you’re considering hiring are very likely to be included among them.

AdvisorCheck also has a few bonus features that make it that much more useful:

• You can save AdvisorCheck listings to your account by adding them to your “Saved Advisors” list, which is particularly helpful when you’re considering hiring a few advisors and trying to keep track of more than a few listings at a time.
• You can even receive alerts when new events (e.g. disclosures, bankruptcy, etc.) are added to an advisor’s record; this feature is especially useful once you’ve hired an advisor, because it allows you to monitor their record and make sure it remains clear once you’ve hired them.

Use AdvisorCheck to make sure you’ve found an advisor you can truly rely on when it comes to managing your money, directing your investments, and most importantly, helping you achieve your short- and long-term financial goals.

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Written by Billy Quirk

Fact checked by Luke Jara

Reviewed by KJ Kim

Disclosure

The information provided in this article was written by the research and analysis team at AdvisorCheck.com to help all consumers in their financial journeys, by providing the resources and the insights to help improve one’s financial health, make it through recessionary and inflationary periods of time, and save their earnings to use them towards building a secure financial future. 

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