Why hire a financial advisor

Working with an advisor can help give you confidence.

Fidelity Wealth Management

Key takeaways

Investors who work with an advisor are generally more confident about reaching their goals.¹
Industry studies estimate that professional financial advice can add up to 5.1% to portfolio returns over the long term, depending on the time period and how returns are calculated.²
Good advisors will work with you to create a personalized investment plan and identify opportunities to help grow and protect your assets.

When we make big decisions in life, most of us look for a source of expertise and guidance to help us make thoughtful choices to meet our individual goals and needs. In fact, investors who get professional financial advice are more likely to feel confidence about achieving their goals.¹

Percentage of investors who say they feel confident about reaching their goal

Source: 2021 Fidelity Investor Insights Study.

Furthermore, industry studies estimate that professional financial advice can add up to 5.1% to portfolio returns over the long term, depending on the time period and how returns are calculated.² But for most investors who choose to work with an advisor, advice is not just about investments. It's also about helping you pursue your goals, grow your wealth, and take care of the people who matter most to you.

Here are 3 ways a good advisor can help make a difference in helping you reach your goals.

1. Works with you to create a personalized investment plan

When you work with an advisor, you generally receive support from a dedicated professional who can help you bring your plan to life. An advisor will ask you about your personal and financial goals, and work with you to help answer questions such as:

Are your spending and cash flow appropriate?
What does financial protection mean to you, and how important is it?
What does growth mean to you, and how important is it?
Are your investments aligned with your preferences?
How will you manage your investment portfolio?

Together, you can develop a documented investment plan that articulates your long-term goals, short-term needs, risk tolerance, and personal values. This plan can act as a guide for future decision-making, and provides the advisor with information necessary to help you devise and document an appropriate asset allocation and, if applicable, a tax-sensitive investment strategy to help you invest in the asset classes and accounts that best suit your objectives and risk tolerance.

Having a documented investment plan can be a big help in staying the course in times of uncertainty or volatility and can help an advisor provide the guidance and encouragement you may need to stay on track to avoid the sometimes costly mistakes investors can make during volatile markets.

2. Can help identify opportunities to help protect and grow your assets

An advisor who understands your long-term goals is well-positioned to help you identify strategies and techniques that can help you grow and protect your wealth.

This may include:

Tax-loss harvesting. Investment losses can help you reduce taxes by offsetting gains or income.
Retirement income planning. Preparing for your future needs is essential to ensuring you can maintain your lifestyle throughout your lifespan.
Tax-smart withdrawals. Reducing the amount you pay in taxes can potentially help extend the life of your retirement savings and open up options for wealth transfer.
Roth IRA conversions. Converting some of your IRA savings to a Roth IRA may potentially reduce taxes on withdrawals in retirement.
Health savings accounts. An HSA offers triple tax savings,³ where you can contribute pre-tax dollars, pay no taxes on earnings, and withdraw the money tax-free now or in retirement to pay for qualified medical expenses.
Advanced college savings strategies. Accelerated gifting and, when possible, opening a 529 within a trust can help optimize savings and may enhance your growth potential.
Charitable donation strategies. Gifting assets, rather than selling them and donating the after-tax proceeds, can help maximize your gift and provide a larger charitable deduction.

3. Builds a relationship with you to better plan for your specific needs

By getting to know you, your family, and your feelings about investing and your future, an advisor can better plan for your specific needs and help you adjust, amend, or extend your plan to keep it relevant as your circ*mstances change. An advisor can also help you evolve your plan as you prioritize new goals or manage life events, and help you manage risk and consider opportunities as markets or tax laws change.

By scheduling regular check-ins, perhaps quarterly or semiannually, an advisor can help you to review whether your objectives and needs have remained the same or whether circ*mstances require you to update your plan.

This can also be an opportunity for the advisor to connect you to specialists with experience with estate tax planning and personal trust services, to help develop a plan designed to help you keep more of your money and may be able to help protect your legacy for generations to come.

A good advisor is a partner on your financial journey

Financial advice is more than just numbers and investments. It's a process that can help you make a plan, chart your progress, and hopefully achieve your personal and financial goals—while feeling more confident along the way.

Why hire a financial advisor | Fidelity (2024)

FAQs

Why would you hire a financial advisor? ›

Can help identify opportunities to help protect and grow your assets. An advisor who understands your long-term goals is well-positioned to help you identify strategies and techniques that can help you grow and protect your wealth.

Learn More Now ›

Is it really worth it to have a financial advisor? ›

A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.

Show Me More ›

Why is financial advisor necessary? ›

A financial advisor helps people manage their money and map out a plan for the future, including retirement. Whether they focus on financial planning in a broader form or focus on niche topics, financial advisors draw up plans or recommend specific investment products and vehicles to meet the needs of their clients.

At what net worth should I get a financial advisor? ›

Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.

Get More Info ›

Is a 1% fee for a financial advisor worth it? ›

The short answer is yes. Ken Robinson, certified financial planner at Practical Financial Planning, says while a 1% fee may be common, advisers who charge based on AUM are increasingly scaling down from 1% at lower thresholds in the past. But if you get a lot of service, the 1% fee isn't always a bad thing.

Show Me More ›

Is 2% fee high for a financial advisor? ›

Most of my research has shown people saying about 1% is normal. Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.

Read The Full Story ›

How much money should you have before hiring a financial advisor? ›

Usually, advisors that charge a percentage will want to work with clients that have a minimum portfolio of about $100,000. This makes it worth their time and will allow them to make about $1,000 to 2,000 a year.

Read The Full Story ›

What is the average return from a financial advisor? ›

Estimates on the return on investment from having a financial advisor vary. In a 2019 whitepaper, Vanguard assessed an “Advisor's Alpha,” or the value that a financial advisor adds to a client's portfolio, to be about a 3% net return per year, depending on a client's circ*mstances and investments.

Discover More ›

Should I use a financial advisor or do it myself? ›

Those who use financial advisors typically get higher returns and more integrated planning, including tax management, retirement planning and estate planning. Self-investors, on the other hand, save on advisor fees and get the self-satisfaction of learning about investing and making their own decisions.

Discover More ›

What is the success rate of financial advisors? ›

That position will allow other advisors in the area to go after your clients and pick them off with their marketing efforts. 5. The Statistics: 80-90% of financial advisors fail and close their firm within the first three years of business. This means only 10-20% of financial advisors are ultimately successful.

Discover More Details ›

Do financial advisors have access to your bank account? ›

It is essential to recognize that your financial advisor's role is strictly advisory. They cannot make decisions or access your funds without your permission. You must make the final decision on whether to withdraw funds or invest your money.

Will a financial advisor make me money? ›

Studies have shown that financial advisors have the potential to add, on average, between 1.5% and 4% to your portfolio above what the average person is able to get as a return on their own.

Tell Me More ›

What is the difference between a financial planner and a financial advisor? ›

Generally speaking, financial planners address and keep tabs on multiple areas of their clients' finances. They develop long-term, strategic plans in these areas and update them on a regular basis over the years. Financial advisors tend to focus on specific transactions and short-term situations.

Find Out More ›

What are the pros and cons of using a financial advisor? ›

Pros of hiring a financial advisor include gaining access to expertise, leveraging time, and sharing responsibility. However, there are also potential downsides to consider, such as costs and fees, quality of service, and the risk of abandonment.