Financial Advisors have traditionally been the go-to for investment recommendations. However, with a massive shift in technology, the average consumer can buy an extremely diversified and efficient portfolio with features like tax loss harvesting for a very low cost. With these changes in technology many ask, what’s the purpose of partnering with an advisor?

Vanguard, one of the world’s largest asset managers, did an amazing study on this topic. They have been a leader in investment research and an advocate for lower industry fees, but still they find that the value of a good Financial Planner far outweighs the cost. If you are already sold that you need an advisor, scroll to the end of this pos, see the percentage, be validated, and find an advisor (I know one…). If not, read these compelling reasons to partner with a comprehensive financial planner.

First, there’s practicality.  Research has shown that a major cause of market underperformance comes from trying to time the market. An individual who is not partnering with an advisor is more likely to sell when the market is low and buy when it’s high, even though this might not be the best option. A good adviser educates investors on healthy investment behaviors. They are the objective third party that helps keep a true vision of reality and does not have the same biases or fears of the consumer.

The second way an advisor can provide value is in financial planning details. Let’s be honest, I don’t know the first thing about picking the right vein for an I.V., the same way a nurse doesn’t understand the best strategies for social security benefits, or the consequences if strategized incorrectly. How many of you social workers really care about the best time to convert from a Traditional IRA to a Roth IRA? It’s not that all of us couldn’t figure it out. The point is, where are your resources best spent? Do you want to become an expert in these areas? Most likely the answer is no.

It’s important to note you need to find a comprehensive financial planner, who does not just focus on investments (A fiduciary is also a must. For more of what a fiduciary is check out this post.)

The last point is that so much of your return can come from tax savings. It’s important to have a plan to effectively manage taxes both in your investments and out. Taxes can create major drag on a portfolio, reducing potential gains. Or if done wisely, they can enhance your gains. This can be done by having a comprehensive planner look at things like your giving, your investments that have a loss, your investments that have a gain (again, giving), whether you are contributing pre or post-tax to your retirement accounts, and where you are holding your investments that pay interest and dividends. These all have major impacts on your performance. Instead of trying to figure out what you think is going to do well next in the market, use an advisor that uses research to create a long-term strategy and manage taxes in and out of the portfolio for you.

Vanguard’s research shows that a financial planner can add as much as 3% per year in excess returns to a client portfolio. This is return that is not coming from the investments themselves, but other ways the advisor is saving money for the client. These are returns that you don’t have to chase in the market. You just have to be willing to allow a wise advisor to take some control.