The True Value of a Financial Advisor

By Gary Brancaleone CFP®, CRPC®

Financial advisors don’t work for free, but their true value can far exceed the fees they charge when investors select them wisely. An advisor’s experience and expertise may actually help you make more money in the long run compared to self-managing your portfolio and other aspects of your personal finances.


A financial advisor can keep you on track throughout all market conditions, which is especially important during periods of market volatility. Investing is emotional. Bull markets are exhilarating, while recessions and volatile periods can cause huge amounts of stress (just think about 2008). Loss is painful, so it makes sense that during times of market loss, recession, and other turmoil that an investor’s instinct may be to go to safety––that is, to sell out of the market and go to cash after declines have already occurred.

However, selling out of the market during a downtown can have damaging long-term consequences on your portfolio. There are transaction costs and broker fees associated with selling out and buying back in to the market, and both rounds of costs would have been avoided by holding your investments. Furthermore: when do you buy back in? If you sold your investment holdings after the October 2008 crash, it’s likely you weren’t back in the market before February 2009, which means you missed the five best post-crash market days.

The figure below demonstrates how significantly missing the top market days can affect your long-term gains. The findings are eye-opening:

Self-managed investors are much more likely than those who work with a financial advisor to react to emotional, short-term market volatility, rather than to hold their investments and keep focused on their long-term plan. Those short-term reactions can have negative long-term effects on your portfolio.


Financial advisors dramatically reduce your workload. The investment universe is vast, and the possibilities for your portfolio are practically infinite when you consider all the combinations of holdings, asset allocations, and diversification available. It takes a significant amount of time to research, develop, weigh, and monitor an investment portfolio. That’s why being a financial advisor is a full-time occupation––it takes that much time and effort to fully understand and stay up to date on the market, monitor it, and know when it’s appropriate to rebalance the portfolio or to invest in a new holding.

The requirements for staying on top of your portfolio can quickly become burdensome if you’re managing it yourself. Investment success shrinks when you consider the opportunity cost of maintaining a portfolio yourself (lots of time spent on it) versus having a financial advisor do it consistently for you. This allows you to dedicate your time to that which matters most in your life.


Financial advisors also provide discipline. Self-managed investors risk falling into one of the two discipline extremes––being too disciplined, or not disciplined enough. Overly disciplined self-managed investors risk “analysis paralysis,” in which they become concerned that their portfolio isn’t as good as it could be, research endlessly and never actually make appropriate changes to their portfolios. At the other extreme, self-managed investors who lack discipline aren’t likely to monitor their portfolio or take action to maintain a proper asset allocation and appropriate level of risk for their situation. In both cases, investors are likely taking undue risks which can be mitigated with the assistance of a financial advisor, who can help avoid missing key rebalancing and buying opportunities.

In addition to the discipline it takes to navigate investment markets, substantial knowledge and expertise is important. Financial advisors can devote years to becoming properly trained, earning credentials such as Certified Financial Planner™ (CFP®) or Chartered Financial Analyst (CFA®). These designations involve extensive training and testing. Other financial advisor designations include the Accredited Investment Fiduciary (AIF®) and the Chartered Retirement Planning Counselor (CRPC®). By working with a trusted and credentialed financial advisor, you can reduce your workload while ensuring that the professional advising you is qualified to do so.

And don’t forget the big picture. Is anyone serving as the financial quarterback in your life? Beyond your investment portfolio, has anyone reviewed your insurance coverage, estate plan, tax situation, and other important areas of your personal finances? A lack of objective guidance and expertise can become time-consuming and lead to costly mistakes in all of these areas without the discipline of a financial advisor helping you along the way.


Financial advisors can be held to different standards when it comes to your money. Be sure to ask and understand whether an advisor is operating under a fiduciary standard, and therefore must make financial and investment decisions in your best interest. A Registered Investment Advisor (registered and regulated by the U.S. Securities and Exchange Commission) is required to conduct themselves in this manner. Other types of advisors, such as brokers, are often only intermediaries between buyers and sellers of investments. As such, their financial recommendations may be biased toward their own profit motives and less toward yours. Select an advisor you feel comfortable with, but one who legally must act in your best interest. Disclosure on this point is mandatory and should be transparent, so don’t be afraid to ask if the relationship is unclear before committing to work with a financial advisor.

Sure, financial advisors charge for their services. But the services and advantages they provide can translate into quantifiable benefits for your portfolio and other aspects of your personal financial situation. A knowledgeable and experienced financial advisor, acting in your best interest, can save you time, prevent costly emotional reactions to short-term market conditions, and keep you on track toward achieving your long-term financial goals. That’s true value!

At Portfolio Solutions®, we provide the full spectrum of wealth planning services so that our clients can work confidently toward their long-term financial goals. And our low-cost, index investment strategies allow our clients to keep more of what the global markets offer, letting them focus on what matters most to them.