Do I Need a Financial Advisor? 10 Questions to Ask Yourself

Do you really need a financial advisor?

I recently engaged a couple on this very topic. They are both doctors. As with most individuals in an advanced professional field, hard work has given them both the blessing of wealth and limited time to manage it.

But that doesn’t mean they should automatically conclude a personal financial advisor is a good investment. They understood that and asked me a foundational question that it’s been my responsibility to answer for my entire career as a financial lifeguard.

“Why should we spend our money on an advisor? Why not invest it ourselves?”

That’s a perfectly logical question for any highly educated, intelligent professional to ask. But it’s not the only question.

If you are wondering whether it makes sense for you to invest in professional financial planning, here are 10 questions to serve as a guide.

1. Will a financial advisor help me make smarter decisions than I would make on my own?

To answer this question, consider your track record on managing your own finances. Evaluate your effectiveness on the following:

Making a firm, written financial plan with SMART goals.
Tracking milestones to determine your progress.
Sticking with the plan for a predetermined period regardless of how you feel about it.
Reassessing that plan after the predetermined period to make logical plan adjustments.

Most busy professionals, if they are honest with themselves, would admit they have been either unwilling or unable to create and execute an effective financial plan.

It usually isn’t because you’re not capable of doing this. It’s simply because it’s human nature to get too busy with your work and/or personal passions to think through goal-setting.

Or, to forget to check your progress, or to decide on a whim you need a vacation, or to alter the plan without considering consequences.

If you’ve ever made any of these very human, understandable missteps, start thinking about the value of a professional working on your behalf to prevent or correct them. And what it will feel like to reach or even exceed your financial goals.

2. Will it give me perspective so I have a better idea of how I’m doing financially?

You can’t really set goals for the future until you have a firm grasp on how you’re doing now. Of course, “how you’re doing” means something different for everyone.

For some, it’s all about retirement - whether you’re on track to retire, and when you can take the plunge.

But it can also be about making sure you’re not paying more in taxes than necessary, or that you have a sustainable plan for charitable giving, or that your estate is set up to pass wealth on to the next generation as you desire.

We all tend to focus on something at the expense of everything else when, in reality, it’s all connected. Reducing your tax burden affects your retirement timeline. Charitable giving now has an effect on the value of the estate you wish to pass on to your children.

A comprehensive plan gives you the perspective you need to know how you’re doing overall. While that’s not impossible to put together on your own, it’s extremely difficult for most to do without the help of a financial advisor.

3. Can I expect an advisor to keep me on track to achieving my goals?

Once you have assessed your current situation and set goals, the more difficult challenge is to stick with the plan. The reason is simple: very few people are as objective about their own money as they think they are.

Our subjective brains often work like this. We start with a game plan:

Goal: Retire in X years.
Objective: Make the maximum contribution to my IRA every year

But then we get excited about a new investment opportunity, or a boat, or a trip to Iceland … you get the idea. Then, if we think about the original plan at all, we do a quick mental edit:

Goal: Retire in X years ... + 1 or 2.
Objective: Make the maximum contribution to my IRA next year. This year, spend Y.

More commonly, we forget all about the original plan. You may recall a time when you looked back on your financial decisions and realized just how far you diverged from your goals. Sometimes you feel okay about those decisions, other times you regret them. Either way, you’re usually back to square one.

Part of a financial advisor’s job is to hold you accountable to your own goals in regular meetings and check-ins. It’s a partnership that serves as a check on your impulses (the same impulses that everyone has).

Can you buy that boat? If it’s not in the original plan, it shouldn’t be an automatic yes or no. The answer to these questions is always the same: “Maybe, but let’s take a look at your plan first.”

4. Is this going to save me time so I can focus on what’s important to me?

Some professionals like working with numbers, making spreadsheets, tracking progress, researching markets, trading stocks, and performing any number of other tasks a financial advisor does. But many feel a sense of frustration when managing their wealth. It takes time away from their passions.

You may be able to relate to this. Have you ever uttered the phrase, “There just aren’t enough hours in the day?” What do you usually think about when you say that? Usually, it’s something you have to do getting in the way of what you want to do.

Whether it’s work you’re passionate about, a hobby that gives your life meaning, or making memories with friends and family, it’s common to feel sometimes like having wealth is more of a curse than a blessing. Why? Because spending time and energy managing it gets in the way of those passions.

You only realize when you lose it how precious time is as a resource. A good financial advisor gives a portion back to you so you can use it on that which matters most.

5. Does working with an advisor give me access to investment options I wouldn’t have otherwise?

It certainly should, yes.

Some of the best investment opportunities are in managed funds that cater exclusively to investors represented by financial advisors. Think of them a little like wholesalers. Rather than directly serve you, the customer, they partner with experienced professionals who can give you personalized service.

In our case, Lifeguard Wealth partners with Dimensional Fund Advisors to give our clients an edge they wouldn’t get on their own.

6. Can an advisor save me money on the costs associated with investing?

On the other side of the same coin, financial advisors can also extend the superior buying and selling power they get from their industry partnerships to you.

As an individual investing independently, trading securities (buying and selling stocks and bonds) can quickly get expensive. Brokers charge fees on both sides of the transaction and earn commissions on sales. These costs add up and over time can cut significantly into your gains.

But fiduciary advisors working in your best interests (rather than brokers who are just taking orders) may be members of organizations that trade on behalf of investors. Because of their trade volume, these organizations have the power to dictate terms to brokers and significantly reduce costs.

For example, Lifeguard Wealth partners with Buckingham Strategic Partners (formerly the BAM Alliance). Buckingham has a dedicated fixed income desk, through which we can buy and sell bonds at their competitive rates with no additional markup (a.k.a. commission to the broker) on our side of the transaction.

They can do that because they manage nearly $35 billion in assets. And by extending that trading power to us, they save Lifeguard Wealth’s clients meaningful costs.

7. Am I likely to spend less on taxes and have more wealth in retirement by working with an advisor?

There is a common misconception (don’t feel bad if you think this way) that smart investing is as simple as having a good mix of stocks and bonds, buying low and selling high, and not getting too risky while you’re at it.

But without giving proper consideration to the often overlooked issue of asset location, your portfolio is likely putting you on far worse footing for retirement than it should be.

That’s because, even with the right mix of assets, suboptimal placement - into taxable, tax exempt, and tax-deferred accounts - often results in a dramatic increase in your tax burden in retirement.

We put together a scenario in a previous article to demonstrate this point. By the time you turn 70.5 (now age 72 with the 2019 Secure Act) at which point you must begin taking required minimum distributions (RMDs) from your IRA, your tax burden on RMDs that year could be reduced by as much as 55% with proper asset allocation. See the numbers here.

If you are like most working professionals, you’re likely focusing on your work and on getting to retirement. It’s less likely that you’re doing the long-term calculations that will make a huge difference in your actual cost of living in retirement. That’s an often overlooked benefit of working with an advisor.

8. Will hiring a financial advisor help me retire sooner?

Assuming you are working with an advisor to help you with all of the above, yes.

Truly comprehensive financial planning involves all the aspects of your financial health as you age that have an effect on your retirement date:

Keeping spending in check
Maintaining savings for emergencies
Establishing a health savings account (HSA) to cover medical bills
Reviewing insurance coverage including long-term care, disability, home, auto, umbrella, etc. regularly to make sure coverage is adequate. If not, recommending other professionals to get it addressed.
Maintaining an acceptable margin of risk in investments

And a host of other considerations, all of which contribute to the big picture. If retiring earlier than you think you can - or retiring earlier than you can on your current trajectory - is a major goal, we measure everything against that goal.

Often, we exceed it. A financial advisor can help you take a 10-year retirement goal and, after one year of focused effort, perhaps subtract two years from the timeline, and so on.

9. Will an advisor report my financial status to me so I don’t have to do my own research?

Part of the burden of assessing your financial situation is the effort it takes to gather all the information. Bank accounts, investment accounts, property valuations, lines of credit, credit cards, student loans, mortgages, and a host of other data sources are all pieces of a complex financial puzzle.

If you’re working with a financial advisor you trust (and you absolutely should feel like you’re able to trust this person), you can give them access to all this information. From this, your advisor will aggregate the data and provide you with regular reports along with analysis to tell you plainly how you’re doing.

We use aggregation software here at Lifeguard Wealth called Wealth Access. We pull your data sources into the platform so that you can use the secure online portal to check in whenever you want to. But even if you don’t, we use it to generate reports to discuss with you, regularly.

This can be especially useful when communicating with your accountant at tax time as well.

10. Am I going to sleep better at night?

Simply put, what all this adds up to is peace of mind. A comprehensive financial plan and a partner to help you execute every facet of it is invaluable.

Some of my clients understand this so well, they actively delegate the responsibility of even thinking about money to me. One time I was in the room when a client’s associate asked him if he was okay financially.

He just shrugged, turned to me and said, “I don’t know. Am I?”

It was my pleasure to be able to say with confidence, “Absolutely.”

Partnering with a Financial Advisor: What Do You Think?

Hopefully, if you were unsure whether you needed a financial advisor before reading this, you have a much better idea what that answer is now.

Lifeguard Wealth is about doing what I once did as an ocean lifeguard: providing a service with a value that far exceeds its cost. Lifeguards don’t earn a wage just by sitting in a tower. They understand their job is to be vigilant, ever ready and willing to jump in the water and protect what matters most.

We call what we provide the 4 C’s: Competence, Coaching, Convenience and Continuity.

Competence: Helping you set goals and make smart decisions.
Coaching: Encouraging you to stick with the plan.
Convenience: Saving you time and making your life easier.
Continuity: Helping you create a lasting legacy.

I may no longer be fishing you out of the water, but it’s still my job to encourage you to be safe. To intervene when you’re in trouble. And to always keep watch for signs of trouble on the horizon, even when all seems calm.

To learn more about what we offer, feel free to ask. We’d be delighted to help you answer your first question, “Do I need a financial advisor?” … and all the other questions that come with it.

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The opinions expressed by myself and other featured authors are their own and may not accurately reflect those of Lifeguard Wealth. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.