In Wealth Management

If you’re considering working with a Seattle financial advisor, this is the million (or more) dollar question: is good investment advice worth the cost?

Well, it depends on the definition of your terms. What is “good” advice? What does “worth it” mean to you?

To help you evaluate the value of a financial advisor for your own context, let’s dig into the question of worth, the research around our titular question, and the nuances of a few different situations.

Taken together, this information should help you to think more clearly about the value that a Seattle financial advisor can bring.

What Does “Worth It” Mean?

To start, let’s define our terms. It’s important to qualify what we mean when we say a financial advisor is “worth it.”

At perhaps the most basic level, being “worth it” might mean that a financial advisor’s services would result in portfolio gains that more than offset the costs of the services themselves. Their advice would make you more money than it costs to implement.

This can certainly occur, and, in fact, when working with experienced advisors, research shows that it often does.

Research That Supports the Effectiveness of Financial Advisors

Perhaps the most notable study in this area was carried out by Vanguard, who I believe is the undisputed leader at pushing unnecessary costs out of the financial system.

Published in 2016 and encompassing data from 58,000 self-directed Vanguard IRA accounts from 2008 to 2012, the company’s study concluded that implementing standard wealth management techniques could increase certain client’s effective investment returns by up to +3.0% annually.

That’s notable (although, as the study itself noted, it’s certainly not guaranteed). However, there are a few major considerations that must be taken into account.

The Problem with the Question

The primary problem with Vanguard’s analysis (and, really, with evaluating the worth of financial advisors in general) is that everyone is different. Depending on context, financial advice might have more or less impact.

For example, some individuals will not save as much in tax strategies, since they may not have as high an effective tax rate. Others do not need as much behavioral coaching in order stick with their long-term investment goals.

But it is even more nuanced than that.

For instance, what if an investment advisor recommended you that you should purchase additional life insurance to transfer the risk of a premature death to an insurance company? This would likely decrease your wealth (through higher insurance expense). Yet, in the circumstance where a life event triggered the policy, it would have immeasurable value to the survivors. In many cases, life insurance is never used. However, that doesn’t mean that it wasn’t good, prudent advice.

Or, alternatively, what if you have been a diligent saver your entire life and have accumulated sufficient retirement wealth to be comfortable? In this case, good advice might be recommending more diversification in your financial portfolio. There are many times when I recommend that my clients decrease their investment risk (and likely lower long-term annualized returns) to produce a more stable portfolio. In some instances, my analysis gives them permission to spend more money on themselves, so that they can enjoy life to the fullest.

We Need to Reframe “Worth”

The truth is that the “worth” of a financial advisor isn’t strictly quantifiable.

I believe that a great advisor takes the time to understand the client’s needs. This may involve investment strategy, tax planning, financial planning, estate planning, risk assessment and legacy issues. When you add up all the different areas that could be meaningful, the impact can be very large. I discuss this concept at length in this blog, where I dig into several other studies on the value of a financial advisor.

The Bottom Line: The Right Fit Can Be Worth It

Here’s the reality: Using an advisor certainly can be worth it. While this is true in any context, generally, the more complex your financial situation, the more value you’ll find in working with a Seattle financial advisor.

In general, I believe I can help my clients to live better – although I acknowledge that I may be a bit biased.

Want to Learn More About My Services?

Hopefully this synopsis has been helpful as you consider working with a financial advisor.

What’s your financial situation like? Do any of these considerations apply to you? If you’re looking for additional guidance, I’d love to hear from you.

A career spanning 30 years of financial service experience has given me a deeper understanding of the risks and rewards of investing and familiarity within a broad range of individual financial contexts. If you’re ready to grow your assets with thoughtful investment advice, we may be a good fit.

Schedule a review of your portfolio today, and let’s take the first step toward figuring out what’s best for you. While I obviously can’t guarantee any hard numbers, my sincere hope and belief is that a thoughtful review of your situation will be worth it.

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