Completing a DIY project can provide a sense of accomplishment or fulfillment from not needing to rely on anyone. This can also be true with investing, and a lot of times people are comfortable with and capable of managing it themselves.
However, just like with home improvement projects, there are clear benefits to working with a professional — in this case, a financial advisor.
They can help you align your investments with your goals and risk tolerance, avoid emotional decision-making, reevaluate your plan after major life changes, and much more.
As is the case with DIY projects, you often don’t realize the need for a professional until after learning a difficult lesson. To help you avoid those costly mistakes, consider the following benefits of working with a financial advisor to improve your investment strategy.
Why should I work with a financial advisor?
When markets are generally positive, every investor can appear to be an expert; however, volatility or market turbulence may expose bad investment strategies and behaviors.
Working with a financial advisor can be beneficial in several circumstances, particularly when investors seek professional guidance to optimize their financial strategies and enhance their overall wealth planning.
Research by Vanguard (2020) shows that working with an advisor can potentially add around 3% in net returns, though these benefits are irregular and more significant during market volatility.
An advisor’s value also extends beyond asset management to areas like estate planning, tax optimization, and withdrawal strategies.
Key benefits of working with a financial advisor
The Vanguard Advisor’s Alpha® framework suggests that financial advisors add value primarily through relationship-oriented services like financial planning, behavioral coaching, and asset management, rather than through attempting to outperform the market.
The key benefits of working with a financial advisor include:
1. Asset Allocation
Ensuring the right mix of assets based on your goals and risk tolerance, which can improve long-term performance.
2. Behavioral Coaching
Helping you avoid emotional decision-making during market ups and downs, which can significantly cut into returns.
3. Cost-Effective Investing
Choosing low-cost investments, which help reduce the drag on returns and improve long-term wealth accumulation.
4. Tax Optimization
Implementing strategies like asset location (placing tax-efficient assets in taxable accounts) and withdrawal order, which can minimize taxes and increase your wealth over time.
5. Total Return Approach
Encouraging a balanced portfolio that includes both income and capital appreciation, which can reduce risk and help you meet your long-term goals.
6. Significant Life Changes
Major life events, such as marriage, divorce, inheritance, or selling a business, often require reevaluating your financial plan. An advisor can help assess the impact of these changes on your financial situation and adjust investment strategies accordingly.
7. Trust and Long-Term Guidance
For investors who want to build long-term relationships with a trusted advisor, having an advisor means having someone to guide you through various financial stages in life.
Building a long-term investment plan with help from a financial advisor
Financial advisors can be seen as essential partners for investors, ensuring that you stay committed to your investment plan — particularly during periods of market stress.
By fostering trust and providing disciplined guidance, financial advisors can create better outcomes for both novice and experienced investors.
Additionally, our advisors here at First National Wealth Management adhere to a fiduciary standard, which means we have a legal obligation to act in your best interest. This fiduciary duty ensures that the advice and strategies we provide are always aligned with your goals.
Since everyone has a different financial situation, the best thing you can do is talk with an advisor and tax professional about your investment strategy.
If you need help getting started or are looking for someone to work together with you and your tax professional, reach out to one of our Wealth Advisors and have a conversation!
