By Brandon Miller, CFP–
“I’ll be wearing a scarf,” our private tour guide to the Louvre told me when I asked how we would find her in the crowd. Despite our skepticism, our group quickly spotted the elegant Frenchwoman who expertly guided us through the massive museum. She not only optimized our time and ensured we saw all the iconic masterpieces, but she also pointed out things such as Braque’s The Birds ceiling and doors to secret passageways that we likely wouldn’t have discovered on our own.
Financial planning is a bit like the Louvre in that there are lots of different ways to experience it. You could go it alone by referencing an array of financial books and podcasts and online sources. But that takes a lot of time and energy on your part to do the research. And you may not have access to all the financial tools that the professionals have.
Or you can hire a guide—a financial service or professional—to help you make better use of your time and money. Some options include:
Robo-advisors – These digital financial advisors are like getting the museum’s audio tour in that there’s not much human intervention. They deliver generalized advice based on information and parameters you input. They’re generally inexpensive and easy to use, so they can be a smart step for young investors who want to establish good habits.
Money managers – This is like the group tour in that you get guidance from a human, but it’s short of the comprehensive, customized level offered by financial advisors. Also known as portfolio managers or investment managers, these professionals help you develop an appropriate investment strategy, then buy and sell securities to meet your goals. They manage your investment portfolio and risk, based on your goals and timeframe.
Financial advisors – For the most customized advice, you need someone who will get to know everything about you, including your goals, family, fears, and idiosyncrasies. Going beyond just your investments, a financial planner or advisor looks at your entire financial picture—including things like taxes, estate planning, and insurance—to help you develop an individualized plan for getting to your goals.
Just like a private museum tour, a financial advisor may cost more than your other options. But they can also give you advantages that make those fees money well spent. Here are my top reasons for believing that you’ll come out better with the help of a financial planner:
1. You could make more money. Let’s start off with the biggie. In 2019, Vanguard quantified the value of professional financial advice, finding that it can add about 3% to your net returns. If you pay 1% for that advice, you still come out 2% ahead. As an example, let’s say you invest $500 a month for 20 years. With an earnings rate of 7%, you’d end up with $260,000. Give that rate a 2% bump from professional planning, and your same investment amount yields $334,000—a nice $74,000 extra. And you didn’t have to do all the research to get that return. More money for less work seems like the perfect reason to hire a financial advisor.
2. You get third-party input. Money evokes a wide range of emotions, so it can help to have a barrier between it and your fears or impulses. Too many investors lack self-control, unknowingly act against their own interests, or make decisions based on feelings instead of facts. A good advisor knows you well enough to steer you away from bad choices or prod you toward good ones. Kind of like a psychologist and coach all in one.
3. You could learn about hidden gems. An advisor looks at your financial situation holistically and understands all your goals, not just the financial ones. This knowledge can help them suggest creative strategies or lesser-known investments. For example, a charitable remainder trust could lower your tax bill, provide an income stream for a number of years, and benefit your favorite charity at the same time.
Yes, I’m schilling for my profession, but I truly believe in what we do. Over and over, I’ve seen how people de-stress and benefit from having a professional in their corner when it comes to money. So, for anyone with $100k or more of assets, I highly suggest engaging a financial planner. Just look for the scarf.
Brio does not provide tax or legal advice, and nothing contained in these materials should be taken as such. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Brio Financial Group is a registered investment adviser. SEC Registration does not constitute an endorsement of Brio by the SEC nor does it indicate that Brio has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.
Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.
Money Matters
Published on September 8, 2022
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