Editor's Note: This post was originally published July 2016 and was updated in April 2017 with new information for your benefit.
Investors often gauge a financial advisor’s value by measuring what’s tangible: short-term performance and financial advisor fees.
However a study conducted by Benjamin Cummings of St. Joseph’s University finds there is a positive correlation between hiring a financial advisor and seeing positive impact on your net worth. The study places value on the intangible benefits a good financial advisor can provide you.
Investors should not hire a financial advisor based solely on performance and fees, as doing so would overlook the positive value financial advisors can contribute through intangible benefits – acting as a sounding board for investment ideas, providing you guidance during volatile times in the market and helping you sleep at night. These benefits are valuable to not only your financial health, but also your personal health.
3 Ways Financial Advisors Can Help You
The study by Cummings provides the first two reasons advisors can add value to your investment plan and Dan Heath, co-author of Decisive (a book about making better decisions in life and work) weighs in on a third:
- Making Sure Your Money Works for You: In his study Cummings found that having an advisor is associated with higher equity allocations. This does not always mean having high or all-equity allocations, but it was found that many older investors tend to sit in CDs and cash, where the money isn’t necessarily working towards the investors long-term goals. Putting some of that money – where appropriate – in the market can potentially help boost long-term performance results.
- Helping You Sleep Better at Night: If you have greater confidence in your retirement based on your work with a good financial advisor, you’ll probably sleep better at night. This helps not only your financial health, but also your personal health. You can take more time to enjoy your retirement, instead of constantly worrying about whether you’ll reach your goals.
- Prevent You From Making Emotional Decisions: Heath reasons that financial advisors provide a buffer to investor’s emotional reactions to the swings in the market, helping them stay the course when emotions might suggest otherwise. As famed investor Benjamin Graham once said, “The investors chief problem – and even his worst enemy – is likely to be himself."
Maybe You Need A New Financial Advisor
If you already have a financial advisor and are wondering if they are the right fit for your investment goals, the free ebook A Guide to Finding A Better Financial Advisor could help. In it you will find:
- The 7 signs you need a new advisor.
- What you should expect when working with the right wealth manager.
- Objective evaluations strategies for selecting a new advisor.
Learn More About How Financial Advisors Can Make a Positive Difference
Source: Market Watch