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Is it Worth it to Hire a Financial Advisor?

As with most things in life, it depends on the individual and the situation. Some situations are so straightforward that an advisor is not necessary. More complex situations may benefit from unbiased advice from an advisor acting as a fiduciary. Ultimately, it depends on the complexity of the situation and a person’s individual abilities and preferences.

When is it worth considering?

  • When you do not have the time or interest to engage with financial decisions. If you have a complex financial situation, and you barely have time to keep up with work and family obligations, a financial advisor allows you to delegate financial tasks to a professional. 
  • When you are facing a large financial decision or you are having a difficult time prioritizing financial goals.
  • When you cannot agree on a financial strategy or decision with your partner. An advisor can serve as a neutral third party.
  • When you need to run customized projections and alternate scenarios, stress test those projections, and map out optimal strategies.
  • When you find yourself making emotional decisions about money and investing.
  • When you need to determine how best to draw assets down in retirement.
  • When you want to establish a giving strategy to charitable organizations and to family members.

What do advisors do?

While financial advisors can provide a wide range of services, these are the core activities that provide the greatest value.

  • Develop an investment strategy and regularly rebalance investments.
  • Implement tax strategies such as asset location, tax loss harvesting, Roth conversions, maximizing current year deductions, etc.
  • Behavioral coaching to avoid emotional decisions.
  • Provide comprehensive financial advice that considers all aspects of a financial situation.
  • Reduce investment risk and develop appropriate risk management plans.

Next Steps

Ultimately, a financial advisor can provide comprehensive advice around someone’s financial situation. That advice tends to be most valuable when the situation is more complex. If your situation is more straightforward, you might consider doing it yourself, a robo advisor, or getting advice from an advisor on an hourly basis. For more information on the breakdown of the costs of a financial adviser, read How Much Does a Financial Adviser Cost?

To learn more about the value advisors can deliver check out The Impact of Financial Advice, which explores Vanguard’s Advisor Alpha white paper series.

This is not a recommendation and is not intended to be taken as a recommendation. This material was prepared for general distribution and is not directed to a specific individual.

LPWM LLC does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers.