As you plan for your financial future, you may wonder whether it’s worth working with a financial advisor or tackling your finances on your own.
While there are pros and cons to both, the decision ultimately depends on you.
What are the advantages of working with a financial advisor?
One of the main advantages of using a financial advisor is the expertise and knowledge they bring to the table. A good advisor will have a deep understanding of the financial markets, tax rules, and other complex topics that can be difficult for the average person to navigate. In a study published in the Journal of Financial Planning, researchers found that financial advisors can help clients make more informed and effective investment decisions, leading to higher returns and better outcomes.
In addition to their expertise, financial advisors can also provide valuable guidance and support during times of uncertainty. For example, if you’re facing a major life event like a job loss, divorce, or illness, a financial advisor can help you create a plan to navigate the challenges ahead. In a study published in the Journal of Financial Counseling and Planning, researchers found that working with a financial advisor can lead to increased financial well-being and reduced stress.
What are the perceived disadvantages of working with a financial advisor?
One perceived disadvantage of working with a financial advisor is the cost. In a study published in the Journal of Financial Economics, researchers found that the fees charged by financial advisors can significantly erode investment returns, especially for small investors. When working with clients, we always try to demonstrate added value. Where a relationship is not mutually beneficial, then we will review whether it should continue.
Another perceived downside of using a financial advisor is potential conflicts of interest. In a study published in the Journal of Financial Planning, researchers found that financial advisors who receive commissions for selling certain products may be more likely to recommend them to clients, even if they are not the best option. In the UK, strict rules have been governing this for a decade, and we must disclose and manage any conflicts of interest.
