- Speaking with a financial advisor can help you make confident and informed decisions.
- You may learn new strategies or new ways of thinking about your financial picture as you collaborate with an advisor to build a flexible financial plan.
- An advisor can help you discover your goals, understand your options, and help identify the next steps to take.
There are many kinds of people in the world—from spreadsheet-loving planners to go-with-the-flow spontaneous types. For them, and everyone in between, financial advice can be beneficial.
That's because proactive planning with an advisor can help people feel more confident about their financial decisions. In fact, one Fidelity study found that 70% of people who sought help from a financial advisor said they felt confident about their finances.1
Of course, the value of advice varies greatly. For one thing, financial advice can mean very different things to different people. For some investors, online financial planning tools or a single investment solution may meet their needs. For others, including people with more wealth, complex situations, or those who put more value on having a personal advisor, a one-on-one relationship with a financial advisor may be a better fit. In addition, the value of financial advice will vary over different time periods, depending on the personal circumstances, market conditions, and more.
Advice: Not just for investments
Your financial advisor may or may not make a lot of investment recommendations, depending on your situation, since many investment decisions can be made with a service like a robo advisor or a hybrid robo advisor. (A hybrid robo advisor is a service that typically combines a professionally managed account—through the help of a robo advisory service—with access to financial planning.)
Financial advice may include a combination of discretionary investment management, where investment decisions are made for you, and nondiscretionary financial advice where you direct the conversation and decide how and when to take action. You may only need one or the other, or you may want both.
Learn more on Fidelity.com: Robo advisors: Affordable, professional, investment management
Even if your advisor isn't choosing your investments, they can help you stick to your investment plan when the market gets rocky. Helping you stay invested can be one of the most valuable benefits of advice. That's because research has shown that staying invested through market ups and downs can increase the long-term success of your plan.
4 more ways financial advice can help you make the most of your money
1. Discover goals and develop a flexible plan for achieving them
Everyone wants to retire one day—or to at least have the option. But you may have short- and medium-term goals to save for as well.
A financial professional can help identify your highest priority goals and develop a plan for achieving them, after ensuring that your financial foundation is solid.
For instance, an advisor could suggest foundational moves such as:
- Saving enough to get the full match from your employer in a workplace retirement plan if you have access to one
- Saving in a health savings account (HSA) if you have access to one
- Establishing an emergency fund to cover 3–6 months' worth of essential expenses
Uncovering your personal priorities is also an important step. For instance, you may want to save aggressively for retirement but your immediate priority might be getting out of an apartment and into a single-family house in the next year. The value of working with an advisor can be developing a plan that reflects your circumstances and goals.
The key is having the flexibility to make the most of your money in a way that makes sense for you and your family both in the short and the long term.
2. Start making intentional money moves
A conversation with an advisor can be educational and motivational.
"Sometimes our clients have made a good start or they're already in a decent spot, but they haven't been intentional about how they're saving," says Franklin Davis, CFP®, a Fidelity advisor who coaches clients through Fidelity® Personalized Planning & Advice, Fidelity's hybrid robo advisor service.
Even small changes can have a big impact over time. Going through your budget with an objective third party can help spot areas of spending that could be trimmed—forgotten subscriptions for instance. Freeing up extra money in your monthly budget can give you more money to save or pay off debt.
3. Find out where you stand
Talking to an advisor about your financial picture and goals can help you understand where you stand relative to your goals and then develop a plan to achieve them.
"When someone is 50 years old without much saved for retirement, we have to talk about the reality that they are probably not going to be able to retire for a while if they want to have the kind of retirement they may be planning," says Davis. It doesn't have to be all bad news though—by increasing the amount they save and planning to work longer, savers who start later may still live the way they want in retirement.
Some people are on the other end of the savings spectrum, with a lot of discipline for saving but a reluctance to spend. "I remember talking to a woman who liked outdoor sports and felt guilty that she bought a ski pass for $800 a year and a $1,500 mountain bike. When we walked through her spending and saving, she was doing everything she needed to do and I was able to help her feel better about spending money on the things she valued," Davis says.
4. Learn new strategies
Getting a little bit of advice or a new perspective may help you navigate options and make decisions when it comes to picking an account to save in. For instance, your situation may qualify for an account that offers tax benefits—and you may not even know it.
"I actually just talked to someone who was contributing to their workplace savings plan and wanted to contribute to an IRA as well. So they were making nondeductible contributions to a traditional IRA, " Davis says.
For contributions to a traditional IRA, the amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds a certain level. In this case, the investor was unable to make deductible contributions to an IRA—but they were eligible to make Roth IRA contributions.
A Roth IRA allows contributions to be made after taxes have been paid. In retirement, or after age 59½, withdrawals of contributions and earnings are tax-free.2 A traditional IRA typically allows a tax deduction for the year the contribution is made, and earnings can grow tax-deferred. In retirement, withdrawals are taxed as income.
"When I told them the difference and explained how Roth IRAs work, they said, 'Oh my gosh, I should totally do that,'" says Davis.
Another way an advisor could help guide a decision like this is by talking about your saving and spending style. For people who are eligible to contribute to a Roth IRA or a deductible traditional IRA, it can make sense to think about which account allows them to save the most for retirement. For those who will save and invest the tax savings from a deductible contribution, a traditional IRA may be a good choice. People who may spend their savings could get a bigger benefit from saving in a Roth.
Read more in Viewpoints on Fidelity.com: Traditional or Roth account: 2 tips to choose
Implementing your plan: Take your first steps
The financial choices you make today can have lasting effects on your life. Speaking with a financial advisor can help you make those decisions more confidently and stay on the right track. When more questions come up or you're ready to take the next steps, a financial advisor is there to help you figure out where you want to go and how to get there.