5 Ways a Financial Advisor Can Save (Or Make) You Money Every Year
Written by Twitter.
"
data-author-socials=""
data-author-posts-url="https://www.gobankingrates.com/author/nicoleaudrey/">
Nicole Spector
Edited by
Amber Barkley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
In the personal finance space, it’s generally strongly recommended that you work with a financial advisor. These professionals can help you on a granular level and tailor their expertise to meet your specific needs. That’s all well and good, but working with a financial advisor isn’t free.
Financial advisors charge either hourly fees, flat fees or percentage fees for their services, and it can all really add up. So, it’s important to understand exactly how and why a financial advisor is worth the investment.
Catalyzing Action — And Getting Stuff Done
Maybe you know exactly what you need to do to build, maintain and reap the benefits of wealth. You may truly know it all, but do you know how to strategically implement what you know?
“Arguably the biggest way an advisor can save and make a client money is being a catalyst for action,” said Scott Sturgeon, founder and senior wealth advisor at Oread Wealth Partners. “Essentially motivating the client to act or ‘get stuff done.’ Often, especially when I first start working with someone, they’d had every intention of getting an estate plan done for years, but for some reason it just kept getting put on the back burner.
“In that example, I step in to help them understand what the process entails, to help think through what an estate plan for them might look like, introduce them to an attorney to help with document drafting and help them implement the plan as it pertains to their assets.”
Showing You How To Put Excess Cash To Work
If you have the blessing of having more than enough cash on hand — including in an emergency fund — then you need to know how to put that extra dough to work. A financial advisor can help with this.
“I’ve had clients who were holding hundreds of thousands of dollars in cash for no reason other than they didn’t know what to do with it or it just wasn’t something they thought about,” Sturgeon said. “Cash, relative to other asset classes, is historically a pretty poor asset to hold, because it’s often outpaced by inflation and therefore loses value over time.
Thanks!
“Simply helping a client understand that concept and the importance of putting money to work while simultaneously helping determine the right amount of cash to hold can create wealth over time, but also saves them from paying the opportunity cost of holding too much cash.”
Strategic Tax Planning
“Another example that comes to mind is tax planning,” Sturgeon said. “It’s something the vast majority of people don’t think about or don’t want to think about! The reality, though, is that for every dollar you’re not paying in taxes to state or federal governments, the more money you’re able to put to work elsewhere investing or pursuing something you’re passionate about — hobbies, travel, etc.
“If I can help clients fund and invest in a Health Savings Account (HSA), for example, they are potentially saving thousands in taxes in the present day, plus they’re able to invest those funds and grow that investment over time.”
Behavioral Coaching
This one may sound like it doesn’t directly apply to your money, but it actually does: how you think and behave. A financial advisor can help keep you grounded, informed and in a healthy financial mindset so that you can make smart money moves.
Carla Adams, founder and financial advisor at Ametrine Wealth, provided an example of how she uses behavioral coaching to benefit people.
“When the market is in the midst of a big downturn, I keep my clients calm and deter them from pulling their money out of the market,” Adams said. “While we all know you are supposed to buy low and sell high, we as humans are prone to doing the exact opposite. When the market is tanking, we freak out and want to sell to cut our losses, and then jump back in the market when it is starting to surge again.
“Doing so is incredibly detrimental to building wealth and probably the biggest killer of wealth I have witnessed in my career.”
Ultimately, Adams’ clients make their own decisions about what to do with their money, but when markets are performing poorly, she, as their financial advisor, is there to keep them strong.
Working With Your Unique Needs, Wants and Goals
Another significant benefit financial advisors provide is to really get to know you and assess the specifics needed to get you financially on track. Satayan Mahajan, CEO of Datalign Advisory, an AI-enhanced platform matching consumers with financial advisors, described financial advisors as “personal trainers for your money.”
“Just as a trainer tailors workouts, a financial advisor creates a plan that perfectly aligns with your goals and helps grow your savings, cut debt and strengthen your investments,” Mahajan said. “They also keep you on track and help you adapt to life changes, so your finances sync with your life.
“Your financial advisor also offers expert guidance when it comes to investments, taxes and retirement. Meaning, you get peace of mind knowing your advisor has the knowledge and experience needed for stress-free planning.”
More From GOBankingRates
