Unlocking the Value of Independent Financial Advisors
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
Tactical 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.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bouchey Financial Group, Ltd. [“Bouchey Financial”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, no portion of this discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bouchey Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Neither Bouchey Financial’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if Bouchey Financial is engaged, or continues to be engaged, to provide investment advisory services. Bouchey Financial is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bouchey Financial’s current written disclosure Brochure and Form CRS discussing our advisory services and fees is available for review upon request or at www.bouchey.com. Please Note: Bouchey Financial does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bouchey Financial’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a Bouchey Financial client, please contact Bouchey Financial, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.