How to work with a financial professional

Three key ways a pro can help you plan, invest, and protect your family.

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You probably wouldn’t climb a mountain without a guide. But when it comes to charting a financial course, many people feel they need to go it alone. That’s often not the best strategy, because our strongest money instincts—fear and greed—tend to block the path to success.

Whether you are just starting out, changing course, or navigating one of life’s inevitable speedbumps, an experienced financial professional can help. After all, life is not a straight road; it has many unexpected turns—marriage, divorce, the birth of a child, buying a home, paying for college, losing a job or getting an new one, transitioning into retirement, and much more.

“Having a strong relationship with a financial professional can be a huge benefit for individuals and the people they care about,” says Steve Gresham, executive vice president in Fidelity’s Private Client Group. “A financial professional can help you in a variety of ways, from preventing you from making big mistakes and being blindsided by certain risks to helping you understand financial trade-offs and developing personalized strategies that can help provide you peace of mind.”

Let’s look at three key areas where a financial professional can help you reach your goals.

1. Investing

The nightly news almost always includes a mention of what the S&P 500® and Dow Jones Indexes did. While those broad benchmarks have a role to play in evaluating investment returns, the truth is that most investors fall far short of “market” performance. Independent research firm DALBAR estimates that the average stock investor trails the stock market by nearly four percentage points annually.1 One key reason: bad timing.

Investors as a whole tend to buy investments that have been rising and sell those that have been falling, as fear and greed get the better of them. That amounts to buying high and selling low, a sure-fire recipe for underperformance.

The antidote: a disciplined investment process to avoid the harmful effects of emotional decisions. Research has shown that asset allocation is a key driver of portfolio returns. But only about half of do-it-yourself investors have an asset allocation that is roughly on track for their age,2 according to data from 401(k)s and other workplace savings plans that Fidelity administers.

That’s where a financial professional can add so much value by helping you identify the right asset mix to help you reach your goals in light of your timeframe, financial situation, and stomach for risk. But setting an asset allocation goal is not enough; you need to stick with it through good times and bad. That discipline helps you buy low and sell high.

“Most of us experience similar feelings when the market is falling, but acting on our emotions may not always produce the best financial results,” says Joe Steeves, senior vice president in Fidelity’s Private Client Group. “An experienced professional can offer a steady hand during stressful times and help you stick to a plan that’s right for your situation.”

Tip: Watch the Learning Center video on disciplined investing: "Financial planning through the lens of disciplined investing."

2. Reducing taxes

No one knows what the market will do. But a professional can help you save your hard-earned money through tax-efficient investment strategies that provide the potential to defer, manage, and reduce your tax bill.

Just helping you think through which of your investments should be held in which types of accounts can make a big difference for after-tax returns. Should a REIT fund be held in a brokerage account, or would it be better in a tax-deferred retirement account or annuity? What about growth stocks or municipal bonds—should those go into a Roth IRA or into your taxable account?

Because each of these investments is subject to different tax rules, and each account offers different tax benefits, coming up with a strategy for what to put where can potentially reduce the taxes you have to pay on your investments overall.

Tip: Read Viewpoints: "Why asset location matters"

In general, there are three strategies you can use to try to manage your federal income taxes:

  1. Defer: Use tax-deferred accounts such as 401(k)s, 403(b)s, IRAs, health savings accounts (HSAs), deferred annuities, and 529 college savings accounts to defer tax liabilities.
  2. Manage: Employ asset location strategies, putting high-tax investments, like income- generating bonds, in tax-deferred accounts and tax-efficient investments, like long-term stock investments, in taxable accounts. Or consider other tax reduction strategies, like tax-loss harvesting and contributing appreciated securities to charities instead of selling them in order to donate cash.
  3. Reduce: Potentially eliminate federal taxes by investing in tax-free municipal bonds and 529 college saving accounts. If you think taxes will go up, you can use a Roth IRA instead of a traditional IRA to help save for retirement.

Tip: Read Viewpoints: "How to invest tax efficiently"

3. Planning for life’s challenges

Having a relationship with a financial professional also creates the opportunity for you to manage the risks and needs of your family as they change over time. This means everything from planning for retirement to managing the financial impact of children and parents through different life stages to protecting your own long-term financial goals from excessive risk.

But before you embark on detailed money conversations, you’ve got to find a financial professional who’s right for you and your situation. If you’ve never worked directly with a financial advisor before, it may be difficult to envision what it would be like to work with one. A good place to start would be to find out how the advisors you are considering are compensated. In addition, here are a few questions and traits to look for when you meet with a prospective financial advisor:

Questions you always wanted to ask your financial professional… but were afraid to ask…

Key questions What to look for
Who are you? Their professional experience, education, and industry credentials
What do you do? Their ability to provide clients with a wide range of investment and financial planning solutions and services
Why do you do it? How their values, motivations, and interests help their clients
How do you do it? How they work with and manage their relationships with clients
Who do you do it with? The kinds of clients they typically work with
What makes you different? How they differ from other investment professionals in terms of experience, skill, or compassion
Why should I work with you? Their ability to develop rapport and how well they communicate why you should work with this particular investment professional and firm
For illustrative purposes only. Questions are based on the Value Ladder™ work of Pusateri Consulting. Used with permission.

An experienced professional can help you manage the complexities of planning for retirement—choosing how much to save and invest and in which accounts, and then how much to withdraw in retirement, and which investment alternatives and accounts should be used to help generate income.

A financial professional can also help keep your plan on track, helping you make course corrections as your needs change or new risks arise. If you have young children, it may mean buying the right amount of life and disability insurance to provide for your family in the event that you can’t. In midlife, it might involve balancing support for children and aging parents. In retirement, it will likely mean managing health issues, which are a common cause of increased expenses and lost income, and can derail even the best-laid retirement plans.

In many families, a single individual is primarily responsible for investment decisions and managing money. But as we age, the risks of disability, impairment, and death rise. It may not be pleasant to consider, but who would help your spouse or children navigate your financial situation if you couldn’t?

Working with a dedicated and trustworthy professional who understands your financial situation can help your loved ones manage that transition. A professional can also bring an impartial perspective to challenging family conversations, including who will make decisions and what will happen to your money after you are gone.

“Our research shows that seven in 10 adult children believe it is important to know about their parents’ financial situation, and one in three feels he or she needs to know more,” says Steeves.3 “A financial professional can assist in these conversations and step in during the moments that matter, with the information and insight that you and your family need to handle changes as you age.”

Tip: Read Viewpoints Special Report "Heart-to-heart: Talking money with your family"

Staying on track

Creating a financial plan is an important step. But as your life and the markets change, your plan will need to adapt. A financial professional can help you map out health care, Social Security, and retirement income strategies that can keep you on track today and plan for the needs of your family in the future.

Learn more

Fidelity provides a full range of services, so you can work with us in a variety of ways to meet your specific needs and wealth management goals.

  • Call Fidelity at 800-343-3548 to schedule an appointment with a Fidelity representative.
  • Access a comprehensive set of wealth planning services from Fidelity’s wealth management team (for qualifying customers, some services mentioned herein may not be provided by Fidelity depending on customer service model selected).
  • Refer me to an independent registered advisor for more specialized needs.
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1. DALBAR study: The results cited are from the 2015 Quantitative Analysis of Investor Behavior (QAIB) for investment performance from January 1, 1985, to December 31, 2014. DALBAR is an independent, Boston-based financial research firm. Using monthly fund data supplied by the Investment Company Institute, QAIB calculates investor returns as the change in assets after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses, and any other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: total investor return rate and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for the period. Read more here.
The Morningstar study: The 2014 and 2015 Mind the Gap studies compares asset-weighted 10-year investor returns with average 10-year returns. Read more here.
2. Data as of December 31, 2015. Asset allocation based on equity holdings relative to a Fidelity Freedom Fund using a 10% band and based on an assumed retirement age of 67. All data based on Fidelity analysis of 22,000 corporate defined contribution (DC) plans (including advisor-sold DC) and 13.6 million participants.
3. Survey based on 20-minute online interviews with a total of 1,043 adult children. Interviewing took place from October 14 to November 2, 2015. Adult children had to be at least 30 years old with a living parent who is at least 60 years old. The children’s parents also needed to have at least $500,000 in assets and be working with a financial advisor.
Indexes are unmanaged. It is not possible to invest directly in an index.
The S&P 500® Index is a market capitalization–weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange or the Nasdaq.
Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially affect investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
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