If I’m confident in my investment strategy, is it worth hiring a financial advisor to manage my retirement? I feel like I have a solid understanding of long-term investment strategies. As such, I feel that about 1% of my AUM that I pay for outside advice outweighs the returns I am likely to see. Admittedly, it’s important to get outside opinions to compare best practices and investments, but the famous Warren Buffett investment bet – he’s a bettor of low-fee index funds and aggressively managed hedge funds. PORTFOLIO GAMERS – WORRY ABOUT TRUSTING PROFESSIONALS INVESTORS.
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You are absolutely right to ask this question. If you’re confident in investing yourself, does it make sense to work with a financial advisor whose 1% commission on assets under management can reduce your return on investment?
I reached out to my network of advisors for their take on this question. They were quick to emphasize that the services provided by financial advisors could justify the cost. However, many of them also suggested that clients consider whether 1% of the minimum investment management is worth the fee.
George Gagliardi, Financial Advisor, Coromandel Wealth Management, said: “If your advisor manages your property and only charges you 1%, find another advisor, you are overpaying.”
Here’s how to decide if it makes sense to work with a financial advisor.
(Note: The advisors quoted in this article are only speaking for themselves. Your own experience may vary and depending on your circumstances, not everyone can work with a cost-effective advisor.) not.)
Is it right to question the 1% for fair investment management?
Advisors we spoke to generally agreed that paying 1% makes no sense if you are receiving only basic investment management services.
Certified Financial Planner and Managing Director Brian Schmehil said: Wealth management division of The Mather Group.
That is, “unless the advisor is using tax loss harvesting, direct indexes or asset class locations,” he added.
Many services that (maybe) justify the charge
However, if you are looking for a more comprehensive financial planning service, want to manage aspects of your financial plan such as taxes and gift giving, or are struggling to control your emotions during times of market volatility, Calculation method may change. Clients may find it worth the 1% fee, depending on their specific circumstances and the advisor’s services. Here’s what our advisors can offer:
Calmness during a period of volatility
Even confident investors panic or stray from their financial plans.
Investors who let go during bear markets or who are too conservative with their investment horizons may be missing out on valuable returns.
Anna Sergunina, Certified Financial Planner, President and CEO, MainStreet Financial Planning, said:
structure and coordination
A financial advisor can act as a quarterback for the finance team. They may coordinate tax planning strategies with accountants, keep an eye on real estate planning strategies with attorneys, and work with various insurance and retirement professionals to help update risk management products.
Crystal J. Cox, senior vice president of Wealthspire Advisors, said: “We literally do a lot more than just investing.”
tax-conscious investment decisions
Investing wisely is not just about deciding which mutual fund suits your financial needs.
A financial advisor can help you identify more tax-effective ways to manage your investments, gifts, and investment losses.
Tammy R. Wenner, Certified Financial Planner at RW Financial Planning LLC, said: “It was an expensive lesson given the timing of their purchase of the fund, the distribution of capital gains, and the amount of income tax on the client.”
experience
When markets get rough, a financial advisor with a calm “was there, did it” attitude may be worth the price.
“Nothing beats experience,” says Kenneth B. Walzer, a certified financial planner and co-founder and managing director of KCS Wealth Advisory. “Studies show that young investors performed worse than older investors during the global financial crisis, largely because they had not yet experienced a severe bear market. ”
second opinion
Lisa AK Kirchenbauer, Certified Financial Planner, Founder and President of Omega Wealth Management, said: “We all have blind spots, and those of us who see the big picture in our clients’ finances can provide valuable insight and objectivity to even the best investors.”
A second opinion can also help resolve financial disagreements between spouses. Alternatively, the preferences of a spouse who is not confident about money may allow them to have an equal footing in the relationship.
Conclusion
Advisors are quick to point out services they can provide in addition to investment management. However, some point out that it is a high fee for him to pay 1% for services that do not exceed investment tips. However, if you’re looking for advice, adjustments, and ways to counter knee-jerk investment decisions, it might be worth spending money on a financial advisor.
Investment and retirement planning tips
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A financial advisor can help you with questions specific to your investment or retirement situation. Finding a financial advisor is not difficult. SmartAsset’s free tool matches you with up to 3 vetted financial advisors serving your area and allows you to interview advisor matches for free to determine which advisor is right for you. increase. If you’re ready to find an advisor who can help you reach your financial goals, get started now.
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Keep Social Security in mind when planning your retirement income. Find out what your retirement benefits will look like with SmartAsset’s Social Security Calculator.
Susannah Snider, CFP®, is a financial planning columnist for SmartAsset, answering reader questions on the topic of personal finance. Have a question you want answered? Send an email to AskAnAdvisor@smartasset.com. Your question may be answered in a future column.
Note that Susannah is a SmartAsset employee, not a SmartAdvisor Match platform participant.
Photo Credit: ©Jen Barker Worley, ©iStock.com/fizkes, ©iStock.com/Courtney Hale
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