The Value of Advice

Money column

With so many financial options at one’s disposal, it can be difficult to know what’s right for you. While not everyone wants advice, it’s important to know the value that advice can add to one’s financial present and future. In fact, it pays to seek advice. Here’s how:

Advice encourages saving

It’s true. According to a recent study, those who seek financial advice are likely to save money. Further, those who are already saving money may save even more.

One of the main reasons for this is accountability. It’s the same concept as hiring a personal trainer: many people find it difficult to dedicate the time and energy to exercising on their own. With the added accountability of a personal trainer checking up on them and monitoring their progress, they feel more motivated to succeed and stick to their plan.

The same is true for hiring a financial advisor. He or she has the knowledge and expertise to create an investment portfolio and tailor financial strategies to maximize their client’s personal situation. Just like using a personal trainer, one’s advisor helps ensure that their clients stick to their plan or portfolio, making modifications when necessary, and ensuring it remains current to their needs.

Advice helps grow wealth

Like most good relationships, the client-advisor relationship becomes more rewarding over time. In fact, studies show that after working with an advisor for approximately five years, investors could have as much as 50 per cent more growth of their financial assets than similar Canadians who don’t work with an advisor. Moreover, after 15 years, they could have over 2.7 times the financial assets.

How is this possible? The longer a client deals with an advisor, the greater their potential for understanding the markets and different investment choices becomes. As the investor and their advisor move through different stages of the investment cycle, they can discuss the current market situation and trends, and what their best course of action should be. This helps investors make good decisions and minimize errors, especially during times of market turmoil.

Advice inspires retirement readiness

Those who use a financial advisor report greater feelings of confidence towards retirement. This makes sense, as those who use an advisor not only get to discuss their finances with an expert, but one who is intimately aware of their goals, as well as any constraints to achieving that goal. During a multi-year relationship, the investor and their advisor have regular opportunities to review, discuss and adjust their strategy. The investor is reminded over and over about their plan, timeline and financial position. This helps foster confidence in reaching the end goal of a comfortable retirement.

Many retirees agree that truly understanding they can afford to retire is as important as being able to retire. Shifting gears from accumulating to spending one’s savings is a huge hurdle for some retirees to overcome. An advisor can help make this a smooth transition.

Final thoughts

With so many financial options out there, it can be difficult to figure out what’s right for you. To make the most informed and confident decisions for your future, it’s important to talk to a knowledgeable advisor that you trust. To connect with the right advisor, consider asking your family and friends for referrals to financial advisors that they like and trust, then conduct interviews with each advisor to determine the best fit.

When you interview an advisor, ask he or she which services they specialize in, for example, if they offer estate planning services in addition to investment planning. Also, be sure to ask which investment choices they have access to, what their fee structures are and what their personal investment philosophy is to gage the best fit. When chosen properly, the advisor-client relationship can be one of the most rewarding professional relationships of one’s life.

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