I am going to start this blog the same way we start all of our consultations with clients and one of the core reasons that we launched AssetAlign, financial planning is something everyone should have access to and more importantly be utilizing.
Let’s consider the daily activities we rely on experts to handle. From the moment you wake up, you're already outsourcing tasks. Your alarm clock, which is powered by advanced technology, might give you a report on your sleep quality and suggest preventive health measures. Your morning coffee, crafted by a skilled barista, involves a complex process of sourcing, picking, roasting, and brewing. Even your commute relies on a professional driver or the engineering of a well-designed vehicle. The pattern is clear: we depend on specialists to achieve our goals, and we often do the same in return.
Yet, when it comes to personal finance, there’s a surprising disconnect and people often wait for the proverbial house fire to start seeking advice. Despite studies showing that 88% of Americans believe a financial advisor could help them reach their goals, only 35% actually work with one. Why do so many of us ignore the expertise of financial professionals, even when evidence supports their value?
Here are the main reasons people tend to avoid financial advisors
1. Cost Concerns: Many perceive financial advisors as too expensive and assume their services are only for the wealthy. This misconception often deters people from seeking professional help, despite the availability of more affordable options.
2. Self-Reliance: Some prefer managing their finances on their own or rely on advice from family and friends. While this approach might work for some, it often lacks the depth and thoroughness that a professional advisor can provide.
3. Debt and Financial Insecurity: Younger individuals, burdened with student loans and other debts, may feel they don’t have enough assets to warrant professional advice. This can impede effective long-term financial planning.
4. Lack of Awareness: Many people think that financial advisors only handle investments. In reality, they offer valuable guidance on budgeting, retirement planning, tax strategies, and more.
Let’s address these concerns one by one.
Cost and Self-Reliance: These two issues often top the list of reasons people avoid financial advisors. However, it’s crucial to distinguish between cost and value. According to a recent Vanguard whitepaper, a $500,000 investment managed by an advisor could grow to over $3.4 million in 25 years, compared to $1.69 million if managed independently. This translates to a 50% increase in value with professional management. Essentially, an advisor can provide a 8% annualized return over 25 years, compared to a 5% return from self-management. Not all advisors are equal, but a competent one can offer substantial added value.
Debt and Financial Insecurity: Discussing personal finances can be challenging, especially with rising education costs and personal debt. However, a financial advisor can help navigate these difficulties by offering strategies to manage and reduce debt in a fiscally responsible manner. Modern financial technology has streamlined many tasks that once required significant time, making it feasible for advisors to assist with smaller accounts based on future growth potential.
Lack of Awareness: Many people don’t realize that financial advisors offer a broad range of services beyond investment management. They can provide essential guidance on budgeting, retirement planning, tax strategies, and more.
In summary, while there are several reasons people might hesitate to seek financial advice, understanding the true value of professional guidance can make a significant difference in achieving long-term financial goals. Do not be one of those people. Wether you are utilizing our proprietary consultation and matching services, or working with your local advisor, just do it.