Unlocking the Value of Independent Financial Advisors

June 18, 2024|,

Written by: Samantha Masey, CFP®

 

As the technology for self-managed investment platforms and robo-advisors advances, many people have begun to wonder if the cost of hiring a financial advisor is worth it. To some the fee-only model may not appear to be as affordable as other options, but those same people may be surprised what they are giving up by choosing other avenues. In fact, a study by Vanguard found that working with a financial advisor adds up to or even exceeds 3% net returns per year to a client’s portfolio. The added value of tactical investment management coupled with other services such as personal financial planning, legacy planning and tax planning provides a pathway to financial success over the long term. This article dives into the misconceptions about advisor fees and the benefits of working with an independent advisor.

 

Benefits:

  • Tactical Investment Management
  • Personalized Financial Planning
  • Trusted Long Term Relationship

 

Misconceptions about Advisor Fees

When looking for a financial advisor one of the first questions you might ask is what is it going to cost me and you wouldn’t be alone. In fact, this proves to be in the top three most important questions for people shopping for the optimal financial route. When it comes to fees, most independent firms charge a percentage of assets under management (AUM). A 2023 report by Advisory HQ found that fee only financial advisors typically charge 1.02% of a client’s AUM. In addition to this you may be responsible for paying brokerage, custodial or other third-party fees.

In comparison, many people do not realize that the average 401(k) plan participant pays an all-in fee of 2.22% of their assets with costs ranging from .2% up to 5%. These include administrative, plan consulting, investment, and service fees. We often see clients choosing to roll these types of accounts over to our professional management as soon as possible due to these high fees, and the tactical investment management we can offer.

 

Tactical Investment Management

3% returnsTactical Portfolio & Diversification: Any investment platform can provide a baseline investment   portfolio that follows the broad market, but the real value of tactical investment management is realized when an advisor creates a tailored portfolio that not only takes advantage of opportunities in the market but also aligns with your specific financial goals. Independent advisors incorporate the financial planning process in investment allocation decisions to properly invest a client in a diversified portfolio to achieve their unique goals. For some, this could be early retirement or for others, accumulating a large inheritance for their children. To do this, advisors recommend the appropriate mix of assets classes to provide the optimal amount of growth needed to achieve your goals while mitigating the risk to your portfolio. As mentioned earlier, working with an advisor adds approximately 3% net return per year which can be significant over the long term.

Behavioral Coaching: In addition to investment expertise, a secondary benefit is removing the emotion from portfolio decision making. Two of the most common mistakes made in self-directed accounts are attempting to time the market and lacking portfolio diversification. During periods of market volatility, it is easy to allow emotions to influence your decision making and potentially cause you to sell out of the market at a low and reenter at a higher point. Periods of unknowns such as election years are common times when clients have made decisions based on fears, but that is where working with an expert can offer protection from making major mistakes. As your advisor we would coach you to avoid missing out on potential market returns and not allow your emotions to drive investment decisions by focusing on long term gains rather than short term volatility.

The chart below shows the results of asking financial advisors about the most common investment mistakes their clients have made and how they would rank them in terms of worst to least impactful. These common mistakes are immediately addressed and mitigated once engaging an independent advisor.

 

Personalized Financial Planning

Beyond investment management, independent financial advisors provide holistic personalized financial planning that encompasses proactive retirement planning, insurance, estate planning, and tax planning. With the average life expectancy increasing to 77.5 in the US, retirement planning has become a major driver for working with an advisor. In fact, the top financial worry for 30% of retirees is outliving their savings. Our team creates a roadmap for achieving your retirement goals, maintaining your cash flow needs throughout retirement, and enjoying those years with peace of mind.

In addition to retirement, we provide guidance during any times of transition or complicated financial scenarios. We often help navigate:

  • Career changes and employer retirement plans
  • Managing and paying off debt
  • Home purchases or sales
  • Education planning
  • Legacy planning
  • Social Security decisions
  • Tax planning
  • And more

 

Trusted Client – Advisor Relationship

One of the biggest benefits of selecting an independent advisor is having a trusted expert dedicated to knowing your specific situation and managing your portfolio over the long term. At Bouchey Financial Group, clients have access to our entire team of advisors, which ensures they receive the best service. Our firm does not take our clients’ trust lightly and thus works to develop deeper knowledge of personal situations to help identify and achieve their financial goals. With a client retention rate of 99%, we focus on building long-term, trusted partnerships. This not only translates to lifelong clients, but also trusted partners for generational wealth.

 

Conclusion

Technology has undoubtedly transformed the landscape of financial services, but the role of financial advisors remains indispensable. Working with an independent financial advisor provides tangible results of increased portfolio returns, but also intangible benefits through holistic financial planning, behavioral coaching, and personalized advice. The benefits and peace of mind gained from working with a trusted advisor are well worth the investment for one’s financial future. If you have further questions about the value we add to our clients’ lives, please reach out to our team at Bouchey Financial Group.

 

Bouchey Financial Group has offices in Saratoga Springs and Historic Downtown Troy, NY as well as Boston, MA and Jupiter, FL.

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