If you are confident in your own financial investment strategies, is it worth paying a financial advisor to manage your retirement savings? I feel I have a strong understanding of long-term investment strategies. And as such, I feel that the roughly 1% I pay for any outside advice is more than the profit I get from managed assets. True, it’s important to get outside opinions to compare best practices with investments, but Warren Buffett’s famous investment bet—combining a low-fee index fund with an actively managed portfolio of hedge funds—makes me believe any expert. Investor.
– Mike
You are absolutely right to ask this question. If you’re comfortable investing on your own, what’s the point of working with a financial advisor who charges 1%? Assets under management Can it reduce your return on investment?
I reached out to a network of consultants to get their perspective on this question. They were quick to emphasize that. The services are financial advisor It can be given and can justify the cost. But many suggest that their clients consider the 1% fee for bare-bones investment management to be worth it.
“Managing investments is (or should be) only a small part of what financial advisers do for their clients,” says George Gagliardi, financial adviser at Coromandel Wealth Management. “If your advisor is managing your assets and charging 1%, find another advisor. You are paying too much.”
(Note: The counselors mentioned in this article speak for themselves. Your own experience may vary, and not everyone will find working with a counselor worthwhile depending on their situation.)
You are right to ask for 1% for equity investment management
Ask an advisor: I have a ‘strong understanding’ of investment strategies. Why should I pay 1% to a financial advisor?
Advisors we spoke with generally agreed that paying 1% doesn’t make sense if you’re getting basic investment management services.
When you’re a seasoned investor — without additional services like financial planning and taxes — hiring a financial advisor may not be worth the fee, says Brian Schmehill, a certified financial planner and managing director. Wealth management at Mather Group.
Ask an advisor: I have a ‘strong understanding’ of investment strategies. Why should I pay 1% to a financial advisor?
However, if you are looking for more Comprehensive financial planning servicesWhether you want to manage taxes, gifts, and other aspects of your financial plan, or have trouble controlling your emotions during market volatility, your calculations may change. Clients may find that a 1% fee is worth it, depending on their circumstances and the advisor’s services. This is what a consultant can provide.
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Stability in times of volatility
Even confident investors get scared or shy away from their financial plans.
Investors who liquidate investments during a bear market or invest conservatively for the time being may lose valuable funds.
“A financial advisor helps investors stick to the strategy and guide the decisions without emotional elements,” said Anna Sergunina, certified financial planner, president and CEO at MainStreet Financial Planning.
Structure and coordination
A Financial advisor Your finance team can serve as the quarterback. They can coordinate tax planning strategies. accountantsPursue estate-planning strategies with attorneys and collaborate with various insurance professionals and pension specialists to help update risk management products.
“We help clients decide how to structure Social Security (and) Medicare,” said Crystal J. Cox, senior vice president at Wealthspire Advisors. “We have a lot to do outside of investments.”
Tax-conscious investment decisions
Investing wisely is more than just deciding which mutual fund meets your financial needs.
A financial advisor can help identify more tax-efficient ways to invest, gift and manage investment losses.
“One of my clients was surprised to learn the income tax implications of investing in a target date retirement fund in a taxable account,” says Tammy R. Wenner, a certified financial planner with RW Financial Planning LLC. “It was an expensive lesson considering the timing of the purchase, capital gains distributions and the client’s income tax bracket.”
Experience
A stable financial advisor can pay a fee with a “been there, done that” attitude when markets get rough.
“There’s also no substitute for experience,” says Kenneth B. Waltzer, a certified financial planner, co-founder and managing director at KCS Wealth Advisory. “Studies show that young investment professionals fared worse than older people during the global financial crisis, mainly because they haven’t yet experienced a severe bear market.”
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Second opinion
“It’s important to get an objective second opinion about your portfolio in terms of diversification, risk and tax management,” says certified financial planner Lisa Eke Kirchenbauer, founder and president of Omega Wealth Management. “We all have blind spots, and those who look at a client’s overall financial picture can provide valuable insights and realism to even the best investors.”
The second opinion helps break up the relationship in financial disputes between spouses. Or, financially independent partner choices allow them to have an equal footing in the relationship.
Bottom line
Advisors are quick to suggest services they can provide in addition to investment management. But many note that 1% is a high fee for services that do not go beyond investment recommendations. But if you are looking for advice, coordination and a way to deal with investment decisions that reduce labor Financial advisor It might be worth the cost.
Investment and retirement planning advice
Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool It matches you with vetted financial advisors serving your area, and you can make a free introductory call with your advisor matches to determine which one you feel is right for you. If you’re ready to find an advisor to help you achieve your financial goals, Start now.
When planning for income in retirement, keep an eye on Social Security. Use it SmartAsset’s Social Security Calculator Find out what your benefits will look like in retirement.
Keep an emergency fund handy in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t exposed to high volatility, like the stock market. The trade-off is because the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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Susanna Snyder, CFP® was a financial planning columnist for SmartAsset at the time of this writing. Have a question you want answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Susanna is not a participant in the SmartAsset AMP forum and is an employee of SmartAsset.
