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What Should Financial Advice Look Like?

Many people have hired a “financial planner” or “financial advisor” for investing their retirement rollover or the kids’ college savings. Often, we’ve heard people say they use a “financial planner” or “financial advisor,” yet the person they’ve hired typically invests their money and does little or no actual financial planning. How about the wealth manager? Same thing, often little or no actual financial advice given other than investment advice.

Today, financial advice should be all-encompassing. A recent Barron’s article states,“Whether you’re starting a family or starting retirement, there often comes a time when so many factors are in play—current spending needs, future savings and legacy goals, upkeep of a vacation house—that paying a financial advisor to serve as your expert juggler-in-chief will prove to be a far better investment than any hot stock could ever be.”

If the only service an advisor provides is investment management, then consider what you are paying for that investment advice… Is the return on your investments alone worth the amount you are paying? We think you should be receiving much more advice. In a typical quarterly meeting with a financial advisor, we believe just a few minutes should be spent on investment performance and the majority of the time should be spent on all of the other moving pieces of a person’s financial life. Examples of these are tax planning, insurance needs, estate planning, college savings, retirement planning and yes – budget planning, as your budget is the foundation of all the other moving parts.

Vanguard estimates that certain advisory services, including portfolio rebalancing and tax-advantaged allocation and withdrawal strategies, could add about three percentage points to a client’s annual returns. But those numbers factor in only the potential investment aspect of the advice. By taking a look at your entire financial picture, things such as insurance, wills, trust, college costs, budget – the increase in return on your money can be even greater through proper savings and planning—integrating your various life’s choices with your money every step of the way.

Good financial advice should include helping you to organize your finances, project the results of your savings and investments so you can see how well prepared you are for retirement, and help you make decisions with your money that will focus you toward reaching your financial goals as efficiently as possible.

Here are 3 simple questions to ask yourself about the advisor you hire…do they provide the following?

  1. Holistic advice.
  2. Solutions, not products.
  3. Goal oriented investing.