SUMMARY: From apps to blogs to robo-investors, financial advice is now available anywhere at anytime. Should you use these tools to manage your own investments or hire a wealth advisor?
From apps to blogs to robo-investors, financial advice is now available anywhere at anytime. This is a far cry from the days when talk of money management was reserved for an elite few. Now you can learn the ins and outs of 401(k)s, mutual funds, and the latest IRS tax code changes with the click of a mouse or the tap of a screen.
For some, this self-guided expertise may feel like enough to establish a sound investment policy. But the wisdom you can gather from the crowd only goes so far. While managing your own money may provide some savings in the short term, the people whose money truly thrives—to the tune of an additional 1.5-4.0 percent in the life of a portfolio—tend to use a living, breathing wealth advisor.
Keep up with the market
The market is a fickle friend—one who can be a lot of fun but is also prone to wild mood swings. Every bear market will eventually rise, and every bull market at some point falls. A wealth advisor is the conscience on your shoulder who gently reminds you to take deep breaths and ride out any turbulent waters.
An advisor can also help you create a comprehensive financial plan—and see that you stick to it—adjusting as your taste for risk changes over time. He or she will be a regular presence in your life, not just someone you call when things get scary.
Put your money to work
Unless you’re already extremely wealthy, you will likely need to grow your money through investments to set yourself up for a comfortable retirement. While some funds should be readily accessible in low-interest bank accounts, inflation will chip away at them over time. A wealth advisor can help steer this ship so that your investments always reflect your goals and give you the best chance of reaching them.
An advisor can also help you work through more complex (and, at times, difficult) financial decisions, such as the pros and cons of REITs or the best way to maximize annuities. A solo investor might steer clear of these more involved financial options, potentially missing out on higher rates of return.
Should you encounter an unexpected windfall, such as an inheritance or a particularly generous bonus at work, an advisor can be the voice of reason that prevents you from a regrettable splurge, and instead puts your newfound dollars to work paying down debt, maxing out your 401(k), or otherwise investing in the future.
Advise on taxes
One of the biggest draws on your hard-earned and hard-invested money can be taxes. It’s possible to navigate the byzantine web of regulations yourself, but a trusted advisor can lift this major weight off your shoulders.
At the top of an advisor’s list should be crafting a plan for where to put your money and when to take it out that keeps taxes and penalties to a minimum. Left unchecked, taxes can take a real bite out of your investments, retirement savings, and 401(k).
The proper mix of taxable accounts (trusts), tax-deferred accounts (IRAs and 401(k)s), and tax-free accounts (Roth 401(k)s or Roth IRAs) allows you to effectively plan out large expenses during your working years and to budget for retirement. A wealth advisor can keep all these balls in the air.
Plan for retirement
Your portfolio may be diverse and well-groomed and your bank accounts may be flush, but your retirement nest egg is a whole other project that requires frank discussion of your current health (and that of your partner) and how long you expect to live. These topics are often fraught with personal fears, which can make them difficult to manage on your own.
A professional can step outside all of that and be an objective voice that has a clear vision of the numbers and how they will (or won’t) get you to your optimal retirement lifestyle. If you have kids heading to college, designs on a second home, and debt service waiting in the wings, an advisor can put them all on the scale and make sure each priority has what’s needed to keep everything moving along smoothly.
Finally, an advisor can walk you through comprehensive estate planning, making sure your family and assets are properly tended to once you enter that “post-retirement” stage.
Start your prosperous future today
While some feel ready to take on their own wealth management, for many it’s akin to doing their own auto repair—there are lots of moving parts and one wrong adjustment can leave you stranded, wondering where it went wrong.
TDECU’s wealth advisors are ready to help you reach your financial goals. Let’s talk and see what’s possible.