Why Financial Advisers Can Be Worth the Fees

Parents and son talking with financial advisor
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By David Ning

I am a do-it-yourself index investor. Aside from the fact that no one else cares about my wealth more than I do, keeping up with the day-to-day tasks is a hobby that pays me. I like managing my own investments, and I get to keep the fees that a financial adviser would charge to manage my money.

Still, I often suggest that others seek out a competent adviser for their financial management needs. While some people who call themselves financial advisers are really investment salesmen in disguise, others will be able to guide you to appropriate investments and manage them. Here are a few reasons paying a financial adviser could improve your finances.

  • An adviser will keep you from selling in a panic. Money can bring out the worst emotions in us. Staying the course when the market is down is one of the biggest keys to creating long-term wealth. Panicking and selling at the worst possible time will lock in your losses and prevent you from participating in the subsequent recovery. An adviser can help to talk you out of withdrawing everything when times are tough and help you to look at the situation logically. Part of an adviser's job is to offer council and act as a voice of reason when emotions run high.
  • An adviser can help you plan. How much to save, what asset allocation mix is right for you, when to start taking money out and how much you can safely withdraw are just some of the items your adviser should be able to address. Even if you can do these calculations on your own, an adviser can push you to get them accomplished earlier and double-check your assumptions.​
  • An adviser can offer a second opinion. Managing money can be lonely, because talking about the subject is so taboo. But the stakes are high, because one decision can end up costing a significant amount of money. With an adviser who is already familiar with your situation, there's another experienced person to strategize with.
  • An adviser can give you investment suggestions. When new innovations hit the investment marketplace, your adviser can do the research for you and let you know if it suits your situation. He or she can also offer connections if you need different but related services. For example, you might need estate planning or tax help. Your adviser is likely to know someone who can help you, making your selection process more efficient.
  • A third party's validation can help your spouse feel better about your investment decisions. Investing is about odds, and some investments will turn out to be less than ideal. These losses can create a lot of tension if your spouse isn't on board with the overall plan. An advisor can provide confirmation and confidence in the strategy when needed, which can help ease some situations.
  • There's another person familiar with your financials if you pass away. While managing money myself has been a profitable route for our family, this strategy will no longer work if I get into an accident and can no longer manage everything. I can write out specific instructions, but it would still be extremely difficult for my wife to follow and pick up where I left off. The situation would be greatly improved by an adviser. Even though I might still be pretty hands-on, the adviser would know exactly why I own certain investments and keep records of all the investment accounts under our names. My wife can also easily obtain all the information necessary to continue the arrangement without a hiccup if necessary.

Hiring a financial adviser can be costly, even if you are lucky enough to avoid all the bad apples in the industry. But for many people, it's the right choice to make because their services can provide crucial help building wealth.

-David Ning is the founder of MoneyNing.com.

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