What’s The Value Of A Great Financial Planner?

1. Helps Prevent Behavioral Mistakes 

Sadly, we are often our own worst enemies.  Whether it’s not being able to resist the ice cream in the freezer (guilty as charged) or making mistakes with our investments, it’s important to have guardrails to protect us from hurting ourselves.

Investors make behavioral mistakes with their investments in a number of ways, including: 
-Not exercising discipline to either stay invested and committed to their overall investment strategy
-Making decisions based on emotion as opposed to adherence to their overall financial plan
-Acting on cognitive biases (like thinking that certain political parties will be better/worse for the stock market and buying or selling their investments based on who is in power).

All of these mistakes lead to something called the Behavior Gap (coined by writer Carl Richards).  The behavior gap is research that shows that investors on average get 2-3% lower returns than the investment fund in which they are invested.

Avoiding these mistakes are a big reason why investors who work with a financial advisor get better returns than investors who do things on their own.  Because a financial advisor can help you avoid these behavioral mistakes by offering outside perspectives, from someone who is not as emotionally tied to the investments, and at the same time is also working in your best interest as a fiduciary.

2. Provides An Investment Strategy

Some people invest just to invest. They don’t have an overall strategy, they just buy investments they think are a good fit for them at the time.  Is this the right way to invest?  Not at all. 

Without an investment strategy, there’s no rhyme or reason as to why you choose your investments. The right investment strategy focuses not just on the investments you choose, but on the overall outcome you desire.

For example, are you saving to create that retirement paycheck, or are you investing to buy that nice RV so you can travel the US?  Would you like to ensure that kids receive something at your passing, or are you of the opinion that they can build their own wealth?  The answer to these questions (and more) is going to affect your overall investment strategy. 

At Forthright Finances, we will discuss all of these financial goals with you and help you choose the right investment strategy to help you meet those goals.

3. Finds Cost Efficient Investments

We aim to make sure our clients are investing in the best funds with the lowest cost (expense ratio) possible.  When you have a low cost, well diversified portfolio, you minimize your costs and maximize the money you can take home for your retirement. 

In addition to cost-efficient investments, we also need to consider what investments are appropriate for the different types of accounts that you have (taxable, tax deferred, and tax free).  Because some investments are better suited in one type of account than in others.  

Lastly, we also ensure that your workplace retirement accounts (401K, 403B) have the best investments that are tailored to your overall financial and retirement plan.

4. Offers Tax Planning Strategies 

As a former professor of tax planning, former tax preparer, and author of a book on taxes and retirement, being cognizant of tax implications and mitigating tax liability is central to everything we do.

We want to make sure that you utilize tax-efficient investments, have tax diversification, take advantage of tax loss and tax gain harvesting, as well as consider Roth conversions.

In sum, we will work on creating an overall tax planning strategy that will lower your lifetime tax burden.  Doing all of these things will not only give you more money to spend during your retirement but will also offer more money to your beneficiaries in the future.

5. Helps You Clarify And Achieve Financial Goals 

In the past, financial advisors mainly (or only) focused on managing your assets and did little or nothing else for you.  That’s not the case anymore, and you shouldn’t work with someone who is only focused on investments.

Instead, what you want to do is work with someone who will take the time to get to know you, as well as help you uncover and understand your internal motivations and goals.  

Once your life, financial, and retirement goals are clear, only then can we find the best investment strategy to ensure that everything is in sync and works together to achieve your goals. As life changes, your goals may (and likely will) change, as will the specific recommendations to achieve everything.  

6. Explains Difficult Financial Concepts

You should be able to delegate a number of responsibilities to your financial planner.  That’s a big reason why you are paying them!  

At the same time, though, they should also be able to teach you.  It simply isn’t enough for them to give recommendations without any explanation as to why.

You might be thinking, but I don’t want to learn this stuff myself!  And I get it.  You definitely do not need to become a Certified Financial Planner™ (like I am).

But, your financial advisor should be able to break down complex subjects and topics into clear terms, so that you not only know what to do but also why you should do it.

This is especially important for me, because teaching is something that I hold dear.  My grandmother taught elementary school, and I am a former professor of Financial Planning at Cal State University – Northridge (Go Matadors!)  I’ve also written 3 books on retirement planning, and created a personal finance course for young people in their teens, 20s and 30s.

Simply put, I think you should hire a financial advisor with the heart of a teacher.

7. Helps You Create And Review Your Estate Plan

One of the most important, and overlooked, things that people near retirement need to do is ensure that their Estate Plan is up to date, with the right documents either created or updated, reflecting all of their wishes for what they want to happen in the future.

Since working with an Estate Planning is often a costly process, Forthright Finances has partnered with a national Estate Planning firm to help our clients create and review their estate planning documents (like a Will, Trust, Powers of Attorney, etc).  We are able to do this with them at a price that is considerably less than the national average.

Not only does that save our clients money, it ensures that their wishes are followed for the rest of their lives, as well as avoids unnecessary government fees (like probate), and makes sure that their money goes to where they intend for it to go.

8. Provides Peace Of Mind And Reduced Financial Stress 

While you can’t measure peace of mind or reduced stress, there’s something to be said about knowing you have a partner to assist you in all areas of your financial life. 

That will be someone you can delegate work to, as well as be there to assist you when something comes up and you need an unbiased perspective on something.  This will be able to save you time, money, and energy by working with a professional instead of trying to do it all on your own.

And the data backs up that this is a big intangible benefit.  According to Sun Life, people who are working with Certified Financial Planners are “More than twice as many are likely to say they are confident in their plans to retire than those with no financial plan.”