Self-Investing Versus Hiring a Financial Professional

Self-investing is simply making your own investment decisions instead of hiring a professional, such as a financial advisor or a financial planner. A 2022 survey of two thousand Americans conducted by The Harris Poll for financial advisor software firm Intelliflo found fewer than one-third (32%) of people regularly went to a financial professional for advice. The survey found that 15% of respondents said they didn’t have a financial advisor before the pandemic, but were now working with or planned to start working with one. The trend may be most pronounced among younger people. The Intelliflo survey found 71% of Gen Z respondents and 72% of Millennials strongly or somewhat agreed that there were financial topics they wanted advice on without knowing where to turn.

Working with a financial professional can provide you with valuable insight, may help you better understand your investing needs, reduce risk, and help you better manage your taxes. Many people choose to invest on their own, but using a financial professional is becoming more common. If you don’t feel comfortable investing on your own, a financial professional can help you with important decisions and be financially prepared for the future.

Financial professionals who advise individuals on investing may go by a number of titles, including financial advisor, investment advisor, wealth manager and financial planner. They may or may not have specialized training and licenses attesting to their expertise. The Bureau of Labor Statistics in 2021 counted 257,200 professionals working as personal financial advisors helping people manage their money and plan for their financial futures. The work involves meeting with clients, discussing their goals, assessing their risk tolerance, explaining investment options, and recommending or selecting investments. Advisors may also help with planning to pay for education or retirement and monitor and adjust investment portfolios to reflect life changes or market events.

Is it worth paying for a financial planner?

Financial planning is a critical aspect of managing your money and preparing for your future. But when it comes to hiring a professional, you might wonder, "Is it worth paying for a financial planner?" or "Should I just handle my finances myself?" Let's delve into these questions to provide you with some clarity.

Is it worth paying for a financial advisor?

The decision to hire a financial advisor is a significant one. It's essential to understand the benefits of hiring a financial advisor before making this decision. A financial advisor can help you set realistic financial goals, develop a comprehensive plan to achieve them, and regularly review your progress. They provide expert advice tailored to your unique situation, taking into account your income, expenses, financial obligations, and life goals.

The question isn't just, "Is it worth paying for a financial advisor?" but also, "Should I use a financial advisor or do it myself?" Handling your finances alone can be challenging, especially if you're not well-versed in financial matters. An advisor can save you time, help you avoid costly mistakes, and provide confidence knowing your finances are in professional hands.

According to an article by Fidelity (https://www.fidelity.com/viewpoints/investing-ideas/financial-advisor-cost) industry studies estimate that professional financial advice can add between 1.5% and 4% to portfolio returns over the long term, depending on the time period and how returns are calculated.¹

A SmartAsset’s survey (https://smartasset.com/financial-advisor/financial-advisor-vs-self-investing) also found advisors were helpful in increasing diversification, reducing risk, managing taxes, planning for retirement, estate planning and, most important of all, creating a holistic financial plan.

Is it better to have a financial advisor or financial planner?

While the terms are often used interchangeably, there is a difference between a financial advisor and a financial planner. A financial advisor is a broad term for professionals who help manage your money, including investment managers, tax advisors, and estate planners. On the other hand, a financial planner specifically helps you create a comprehensive plan to meet your life goals. CERTIFIED FINANCIAL PLANNER™ (CFP®) certification is a professional designation awarded to individuals who have passed rigorous coursework and an examination to prove their fluency in all aspects of financial planning.

When it comes to using a financial advisor, they often have a broader scope of services, which can be beneficial if you need assistance in various financial areas. However, if you're looking for a comprehensive plan that aligns with your life goals, a financial planner might be the better choice.

At what net worth should I get a financial advisor?

There is a common misconception that only the wealthy need financial advisors. The truth is people at various stages of wealth can benefit from their services. The question to ask is not, "At what net worth should I get a financial advisor?" but rather, "What are my financial goals and how can a financial advisor help me achieve them?" Whether you're just starting to save, preparing for a significant life change, or managing a substantial portfolio, a financial advisor can provide valuable guidance and assistance.

How much does a financial advisor cost per year?

The cost of a financial advisor can vary widely based on their fee structure. Some charge a flat fee, some a percentage of the assets they manage, while others may earn commissions from the financial products they sell. On average, you can expect to pay between 1% to 2% of your total assets per year. It's essential to understand their fee structure before engaging their services to ensure it aligns with your budget and expectations.

The Reynolds Wealth Management Difference

At Reynolds Wealth Management, we believe there are several factors that differentiate us from the typical financial group, differences that make for a distinct client experience – and have allowed us to evolve into a practice that can help meet your needs.

COMPREHENSIVE IN-DEPTH REVIEWS

Understanding where you stand today is a critical step in determining whether you can get to where you want to go. It’s why we offer our new and prospective clients a comprehensive, in-depth review of your current holdings with no obligation.

PERSONALIZED FINANCIAL PLANS

The foundation of any successful outcome is a solid plan. If there is a mutual agreement for working with one another, we can proceed to create a financial road map tailored exclusively for your individual circumstances – designed to help put you on the right track.

CUSTOMIZED INVESTMENT STRATEGIES

We will then develop your custom investment strategy. We do not rely on portfolio modeling tools, but design truly customized investment strategies based on your specific situation, goals, needs, timeline and risk tolerance.

OBJECTIVE ADVICE

Our focus is finding or designing the optimal strategy to help meet our clients’ needs and pursue their objectives. We are under no obligation or pressure to sell proprietary products. Our sole guideline is doing what is in your best interest and right for you.

ACCOUNT TYPE FLEXIBILITY

Based on your individual needs, you have the option to choose either a fee-based advisory account or a commission-based account. We believe these various options allows us to offer you the appropriate account type dependent upon your individual situation and needs.

Conclusion

Deciding whether to hire a financial advisor or planner depends on your financial goals, your comfort level with managing your finances, and your willingness to pay for professional advice. Remember, the ultimate goal is to ensure your financial well-being and meet your life goals. If you're searching for a "financial planner near me," we can help. Connect with us today to explore how our services can support your financial journey.

¹ Depending on the time period and how returns are calculated. Value of advice sources: Envestnet, Capital Sigma, The Advisor Advantage (estimates advisor value add at an average of 3% per year), 2019; Russell Investments 2019 Value of a Financial Advisor (estimates value add at more than 4% per year); and Vanguard, Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha® 2019, (estimates lifetime value add at an average of 3%). The methodologies for these studies vary greatly. In the Envestnet and Russell studies, the paper sought to identify the absolute value of a set of services, while the Vanguard study compared expected impact of advisor practices to a hypothetical base case scenario.