Why hire a financial advisor | Fidelity (2024)

Working with an advisor can help give you confidence.

Fidelity Wealth Management

Why hire a financial advisor | Fidelity (1)

Key takeaways

  • Investors who work with an advisor are generally more confident about reaching their goals.1
  • Industry studies estimate that professional financial advice can add between 1.5% and 4% to portfolio returns over the long term, depending on the time period and how returns are calculated.2
  • Good advisors will work with you to create a personalized investment plan and identify opportunities to help grow and protect your assets.

When we make big decisions in life, most of us look for a source of expertise and guidance to help us make thoughtful choices to meet our individual goals and needs. In fact, investors who get professional financial advice are more likely to feel confidence about achieving their goals.1

Percentage of investors who say they feel confident about reaching their goal

Why hire a financial advisor | Fidelity (2)

Source: 2021 Fidelity Investor Insights Study.

Furthermore, industry studies estimate that professional financial advice can add between 1.5% and 4% to portfolio returns over the long term, depending on the time period and how returns are calculated.2 But for most investors who choose to work with an advisor, advice is not just about investments. It's also about helping you pursue your goals, grow your wealth, and take care of the people who matter most to you.

Here are 3 ways a good advisor can help make a difference in helping you reach your goals.

1. Works with you to create a personalized investment plan

When you work with an advisor, you generally receive support from a dedicated professional who can help you bring your plan to life. An advisor will ask you about your personal and financial goals, and work with you to help answer questions such as:

  • Are your spending and cash flow appropriate?
  • What does financial protection mean to you, and how important is it?
  • What does growth mean to you, and how important is it?
  • Are your investments aligned with your preferences?
  • How will you manage your investment portfolio?

Together, you can develop a documented investment plan that articulates your long-term goals, short-term needs, risk tolerance, and personal values. This plan can act as a guide for future decision-making, and provides the advisor with information necessary to help you devise and document an appropriate asset allocation and, if applicable, a tax-sensitive investment strategy to help you invest in the asset classes and accounts that best suit your objectives and risk tolerance.

Having a documented investment plan can be a big help in staying the course in times of uncertainty or volatility and can help an advisor provide the guidance and encouragement you may need to stay on track to avoid the sometimes costly mistakes investors can make during volatile markets.

2. Can help identify opportunities to help protect and grow your assets

An advisor who understands your long-term goals is well-positioned to help you identify strategies and techniques that can help you grow and protect your wealth.

This may include:

  • Tax-loss harvesting. Investment losses can help you reduce taxes by offsetting gains or income.
  • Retirement income planning. Preparing for your future needs is essential to ensuring you can maintain your lifestyle throughout your lifespan.
  • Tax-smart withdrawals. Reducing the amount you pay in taxes can potentially help extend the life of your retirement savings and open up options for wealth transfer.
  • Roth IRA conversions. Converting some of your IRA savings to a Roth IRA may potentially reduce taxes on withdrawals in retirement.
  • Health savings accounts. An HSA offers triple tax savings,3 where you can contribute pre-tax dollars, pay no taxes on earnings, and withdraw the money tax-free now or in retirement to pay for qualified medical expenses.
  • Advanced college savings strategies. Accelerated gifting and, when possible, opening a 529 within a trust can help optimize savings and may enhance your growth potential.
  • Charitable donation strategies. Gifting assets, rather than selling them and donating the after-tax proceeds, can help maximize your gift and provide a larger charitable deduction.

3. Builds a relationship with you to better plan for your specific needs

By getting to know you, your family, and your feelings about investing and your future, an advisor can better plan for your specific needs and help you adjust, amend, or extend your plan to keep it relevant as your circ*mstances change. An advisor can also help you evolve your plan as you prioritize new goals or manage life events, and help you manage risk and consider opportunities as markets or tax laws change.

By scheduling regular check-ins, perhaps quarterly or semiannually, an advisor can help you to review whether your objectives and needs have remained the same or whether circ*mstances require you to update your plan.

This can also be an opportunity for the advisor to connect you to specialists with experience with estate tax planning and personal trust services, to help develop a plan designed to help you keep more of your money and may be able to help protect your legacy for generations to come.

A good advisor is a partner on your financial journey

Financial advice is more than just numbers and investments. It's a process that can help you make a plan, chart your progress, and hopefully achieve your personal and financial goals—while feeling more confident along the way.

Why hire a financial advisor | Fidelity (2024)

FAQs

Why would you hire a financial advisor? ›

A financial advisor can help you hone in on your goals and map out a way to achieve them. This can be anything from starting to invest, buying real estate, saving for an emergency or retirement, or something else.

What is the benefit of having a financial advisor? ›

Financial Advisor Services

More than four in five financial advisors say that the biggest benefit advisors offer to their clients is helping them develop a holistic, personal financial plan. This benefit is followed closely by having regular check-ins on progress toward financial goals.

What are the pros and cons of hiring a financial advisor? ›

Pros of hiring a financial advisor include gaining access to expertise, leveraging time, and sharing responsibility. However, there are also potential downsides to consider, such as costs and fees, quality of service, and the risk of abandonment.

Is it really necessary to have a financial advisor? ›

Deciding to work with a financial advisor is a personal choice. There is no set litmus test for whether you need one. If you have investable assets, personal and financial goals, or questions about your finances, you may want to hire a financial advisor.

At what net worth should I get a financial advisor? ›

Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.

What are the disadvantages of having a financial advisor? ›

Costs: Financial advisors cost money, and not all charge you in the same way. Some charge a percentage of your total portfolio per year. Others charge you an ongoing annual fee, some charge a one-off service fee, while the investment broker pays others via commissions.

Are you better off with a financial advisor? ›

If you have less than $50,000 of liquid assets then you may also want to consider going at it on your own as the fees might not be worth it. With that said, financial advisors can bring a wealth of information and experience to the table that can make a huge difference in your potential return.

What is the average return from a financial advisor? ›

Source: 2021 Fidelity Investor Insights Study. Furthermore, industry studies estimate that professional financial advice can add between 1.5% and 4% to portfolio returns over the long term, depending on the time period and how returns are calculated.

Is your money safe with a financial advisor? ›

Most reputable financial advisors never take possession of your money. Giving them direct access makes it easy for them to steal funds. Avoid doing that unless you're 100% certain that you can trust the person you're working with.

Do people make more money using a financial advisor? ›

The average return is going to vary from year to year, based on the activity in the market. Studies have shown that financial advisors have the potential to add, on average, between 1.5% and 4% to your portfolio above what the average person is able to get as a return on their own.

What percent of Americans have a financial advisor? ›

It is estimated that in the United States, 35% of people have a financial advisor.

Should I get a financial advisor if I'm poor? ›

It's smart to use a financial adviser when you need or want professional financial advice. If you happen to have a high net worth and you're comfortable managing it yourself, there may be no need. Even if you don't have a high net worth, if you have a complex situation to deal with, you may want to consult someone.

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