The Role a Financial Advisor plays in Financial Planning
If you really zoom out and take a broad look at financial planning, you’ll see that it’s a team sport. The comprehensive process of financial planning involves creating a coordinated plan with a team of professionals. The three main member of your planning team will usually be your financial advisor, attorney, and your tax professional, but there may certainly be others as well. For the purposes of this article, we’ll focus on your financial advisor/planner.
A financial advisor’s role in not just to manage investments for wealthy people. Rather, an advisor or planner’s role is to be a long-term partner who helps individuals or families organize, grow, and preserve their financial resources. Advisors will help create plans, coordinate and guide decision-making, and support adjustments over time as things change. In this article, we’ll explain what advisors do, how they create value, and also explore some common misunderstandings along the way.
HighPoint Advisors, LLC helps individuals and families build comprehensive financial plans designed to support long-term independence. Located in East Syracuse, New York and serving clients throughout the Central New York region as well as many other cities across the country, our firm provides professional guidance across key areas of financial planning, including investment management, retirement planning, cash flow analysis, and risk management. Our advisors work closely with clients to develop personalized strategies that align day-to-day financial decisions with broader life goals helping clients navigate complexity, adapt to change, and maintain financial stability at every stage of life.
What a Financial Advisor actually does
Today’s financial advisor will take a look at your entire financial life and provide advice and strategies in a holistic way. The planning process is all about making informed decisions about wealth now, while creating a strategy for the future.
- Investment and Portfolio Management – Designing diversified investment portfolios, determining appropriate risk tolerance and time horizon until the money is needed, aligning portfolios with client goals instead of market noise, and monitoring and updating portfolios as conditions change.
- Retirement Planning – Determining the level of financial resources you’ll need to retire, setting goals for how much to save, tracking progress, and modeling various timelines. This also requires the coordination of workplace retirement plans, fixed income sources, and other investments. The ultimate objective is to be able to generate the retirement income needed in retirement.
- Tax Planning – Managing and reducing lifetime tax liability by means of utilizing tax-advantaged retirement accounts, optimizing contributions to Roth vs. Traditional retirement accounts, managing capital gains over time, creating an adaptable withdrawal strategy, and helping with charitable giving strategies.
- Budgeting & Debt Management – Cash flow management, reviewing income and expenses, creating saving and spending plans, setting up an emergency fund, prioritizing which order to pay off debts, and identifying cash flow to fund goals.
- Insurance & Risk Management – Protecting wealth by covering potential exposures that could derail your financial plan. This includes checking life insurance, disability income protection, health insurance, accident and liability coverages, and long-term care
- Education Savings – Future education goals may include saving for private school, college, trade school, or apprenticeships. Common approaches utilize 529 Plans, custodial accounts, joint accounts, accounts for minors such as Uniform Transfer to Minors Act (UTMA) accounts, or simply earmarking a bank account.
- Estate Planning – A broad arena that addresses passing on your wealth according to your wishes. Coordinating wills and other legal documents with trusts will help ensure your estate is settled appropriately.
Debunking Some Misconceptions
Financial planning is not limited to people with complex financial lives, and advisors don’t only work with the rich. Let’s talk about some common myths.
- Myth: I don’t have enough money to work with an advisor.
- Reality: Good planners work with a wide range of clients across the financial spectrum. In some cases, individuals who are in the wealth building phase can benefit the most from professional advice. Building the habits, putting the plans in place, and allocating resources towards goals are important things that planners can help with. Needs and goals are often more important than initial account size.
- Myth: I can’t afford an advisor.
- Reality: Fees and costs vary, as do the methods to pay them. Some engagements may charge flat-rate or hourly fees for specific planning, others may represent a percentage of assets managed, while still others may require an up-front sales charge. Many advisors even offer scalable services in an effort to make planning solutions more accessible to people of all income and asset levels. In the end, the benefits far outweigh the costs, as an advisor may help you avoid costly mistakes that could have derailed your progress toward your financial goals.
- Myth: I can manage everything myself.
- Reality: Of course, many individuals can handle some of the aspects of financial planning themselves. However, the financial and economic landscape has become – and continues to be – increasingly complex, making a qualified advisor an invaluable resource. Legislative and tax law changes, market volatility, and a complex mix of available retirement planning tools make professional guidance crucial for long-term financial independence. A financial advisor provides experience, perspective, and objectivity, and can help clients avoid emotional decisions that can take their focus off long-term goals.
The Value of having an Advisor
Benefits of having a real human advisor manifest in many ways – some that show up in the numbers and some that don’t. Advisors can serve as a coach to help you make better decisions and avoid costly mistakes. Apps and artificial intelligence can crunch volumes of data, but an advisor brings experience-based wisdom when volatility shows up. In financial markets, steering away from “buy high, sell low” behavior is key to better returns in the long-term.
An advisor can also bring efficiency to your portfolio and overall financial plan. Coordinating and consolidating accounts, reducing overlap, identifying gaps in coverages, reducing costs, or optimizing tax efficiency are a few ways advisors can help make your overall strategy work harder for you. Online tools don’t create personal relationships, so this sort of customization is the job of advisors. An advisor will work to balance client goals with their emotions, family dynamics, preferences, and changing life events.
While the value of working with an advisor can be significant, quantifying it can be tricky. That value may come in different shapes and sizes to different people. For some it may show up in higher account balances or net worth over time, and for others it may result is the ability to retire a couple years early.
Your "Financial Quarterback"
Oftentimes, holistic financial planning involves a small team of professionals to properly execute all parts of the plan. While a financial advisor is central to manage the plan, he or she can’t do everything, and will need to work with other professionals. The overall financial team may also include a tax professional, attorney, insurance broker, and a banker or mortgage professional, for example.
The financial advisor usually acts as a coordinator of sorts, utilizing other subject matter experts that are qualified or licensed to carry out various parts of the client’s plan. This “financial quarterback” role enables the advisor to work in partnership with others to complete tasks and keep the financial plan moving forward.
As an illustration of this type of partnership, consider a financial advisor focusing on a client’s investments to manage gains/losses and taxes. That advisor would need to work with the client’s tax professional to make sure any investment transactions don’t push the client into a different tax bracket or otherwise penalize that client.
Who can Benefit from a Financial Advisor?
As we’ve learned in this article, financial advisors can work with just about anyone, and can serve in a wide range of roles. A potential client doesn’t need to be wealthy or have an overly complex life. An advisor can add value to anyone that has the desire to act with purpose for the benefit of his or her financial future. An especially good time to engage an advisor would be if there is some major life change that has just happened, or is about to happen. Alternatively, another great time to work with an advisor would be if personal finances are becoming too complicated to handle on your own, or are now too time consuming. Our advisors at HighPoint Advisors, LLC take pride in helping clients pursue their financial milestones. We are qualified and experienced, and are always willing to work with other members of a client’s team when necessary to get the job done.
Financial planning is about creating a framework that supports the life you want to live today as well as in the later stages of life. If you have a vision, but lack a sound roadmap to get there, then maybe it’s time to welcome the structure and accountability that working with a financial advisor can bring.
Contact us today and let us be your financial quarterback. We’d love to hear what you want your future to look like, and we look forward to working with you to get there.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.