Is Working With A Financial Advisor Worth It?

HSBC recently published an article titled "The Future of Retirement, The Power of Planning" which compares the circumstances of investors who work with a financial planner to those who invest on their own. The goal of the study was to determine if there is a benefit to working with an investment professional.

The survey categorized survey respondents as non-planners, advice-seeking non-planners, self-guided planners, and advice-seeking planners.

Non-planners have done nothing by way of financial planning or obtaining financial advice. This group represented 38% of all respondents.

Advice-seeking non-planners are individuals who do not have a financial plan, though they do seek professional financial advice from time to time. They are likely to seek advice about one particular need rather than taking holistic, comprehensive advice. This group made up 12% of all respondents.

Self-guided planners have a financial plan in place but do not seek professional expertise to help them make sense of their finances. Members of this group are likely to be younger, internet savvy, and mid-to-high income earners. This group accounted for 22% of respondents.

Advice-seeking planners have a financial plan and utilize a financial professional to help manage their finances. Members of this grouping are more likely to be approaching retirement or retired, and are typically more wealthy. They made up 28% of survey respondents.

The most glaring findings of the study was the importance of a financial plan. Those with advisor directed financial plans have nest-eggs that are over four times as large as those without plans. Further, consistently working with a financial planner seems to add significant value; Advice-seeking planners had nest-eggs that were 57% larger than self-guided planners.

Why is this? The Financial Engines & AON Hewitt report that investors who manage their investments with the aid of a financial advisor are more diversified, take less risk, and obtain better returns than self-directed investors. In fact, advisor directed investors were found to increase their returns by 2.92% per year after expenses!

Lastly, if you are curious how the size of your nest-egg compares to that of the average American worker, you might be shocked. Excluding the value of a primary residence and defined benefit plans (pensions), 60% of American workers have less than $50k in savings and investments, according to the Employee Benefit Research Institute. Moreover, 79% have less than $100k saved. Only 10% of workers have accumulated a nest-egg of over $250k.

About the author

Lon Jefferies, CFP®, MBA
Lon Jefferies, CFP®, MBA

Lon Jefferies is an investment advisor representative with Net Worth Advisory Group, a fee-only financial planning firm in Salt Lake City, Utah. He is a Certified Financial Planner (CFP®) and a member of the National Association of Personal Financial Advisors (NAPFA). He possesses an MBA and bachelor's degrees in Finance and Marketing from the University of Utah. Lon writes articles for local magazines such as Utah CEO, Business Connect and Utah Business Magazine, and he consistently contributes articles to online magazines such as FIGuide.com and FILife.com (by The Wall Street Journal). Additionally, Lon is an expert author at EzineArticles.com. Lon has been quoted nationally in publications such as the NY Times and Investment News.

Lon can be contacted at (801) 566-0740 or lon@networthadvice.com. Learn more about Net Worth Advisory Group at http://networthadvice.com and visit Lon's blog at http://www.utahfinancialadvisor.blogspot.com.

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