Do You Really Need a Financial Adviser?

A common question is often heard in the world of personal finance: "Do I really need a financial adviser?"

For many, the image of a financial adviser is of stuffy boardrooms and complex jargon, leaving a person wondering if the perceived cost outweighs the benefit. But what if we told you that, for those aiming to build serious financial freedom, professional financial guidance is often a profoundly valuable partnership?

While the internet offers a treasure trove of information, navigating it effectively can be akin to finding a needle in a haystack, especially when that needle holds the key to your financial peace of mind. Let's delve deeper into why professional financial counsel, particularly for high-net-worth individuals or those on the fast track to millionaire status, is often the smartest investment one can make.

The Value of Expert Financial Guidance

If you're pondering the value of a financial adviser, consider this: the 2024 Russell Investments "Value of an Adviser Report" for New Zealand found an adviser will add approximately 4.7% in value each year. In other words, advised individuals, on average, experience nearly a five percent increase in investment returns.

Every.

Single.

Year.

Let that sink in for a moment. A 4.7% per year improvement in returns adds up, year on year, to result in a substantial difference. This isn't just about managing money; it's about significantly enhancing your financial trajectory.

What’s more, this figure is broadly consistent with other research. Consider the "Money and You" survey research from the New Zealand Financial Services Council (FSC), which found people who received financial advice received an average of four percent better investment returns.

Globally, research from institutions like Morningstar's Gamma research and Vanguard's Adviser's Alpha also echo these findings. They pinpoint key areas where advisers add immense value:

1. Appropriate Asset Allocation: It's not just about diversification; it's about crafting a portfolio that truly aligns with individual goals, risk tolerance, and time horizon. Russell Investments' analysis suggests that carefully considered asset allocation can add up to 1.2% per annum in value in this area alone.
2. Behavioural Coaching: This is where advisers earn their weight in gold. How often have market fluctuations sent chills down one's spine, tempting impulsive decisions? Financial advisers act as emotional circuit breakers, preventing costly knee-jerk reactions. Russell Investments noted that behavioural coaching alone can contribute 3.4% in value every year. As the UNSW Business School found in their research, investors are often willing to pay higher fees for trusted managers, valuing the peace of mind that comes from having an expert handle complex decisions. An adviser helps individuals stay invested when everyone else is panicking, and conversely, avoid irrational exuberance when the markets are reaching new highs.
3. Choices and Trade-offs: Life is full of financial dilemmas: "Should I pay off the mortgage or invest more?" "Can I afford to support my adult children and retire comfortably?" Financial advisers help weigh these critical decisions, ensuring choices align with long-term aspirations.
4. Expertise (Technical and Emotional): Financial advisers possess a deep understanding of complex financial products, tax implications, and regulatory nuances. More than that, they are skilled in understanding human behaviour and fostering relationships that empower clients through life's financial challenges.
5. Tax-Savvy Planning: Optimising financial arrangements to minimise taxes is a game-changer for wealth accumulation. Financial advisers can identify opportunities for tax-efficient investing and planning that might otherwise go unnoticed.

The consensus from these studies is clear: the benefits of professional financial advice, both tangible (like increased returns) and intangible (like peace of mind and confidence), significantly outweigh the costs. It's about building a robust financial framework that stands the test of time, rather than just chasing short-term gains.

When Life Gets Complicated: The Adviser's Essential Role

Life is a dynamic, and the major changes across a lifetime can and will add layers of complexity to everyone’s financial situation. Without expert guidance, these moments, ripe with opportunity, can become sources of stress and missed potential.

Navigate Significant Life Changes

Consider a significant pay rise, a career pivot, marriage, or starting a family. These moments often mean a sudden shift in income, expenses, and future aspirations. Similarly, receiving an inheritance, whether large or small, presents both a tremendous opportunity and a potential minefield of financial decisions. What's the best way to leverage these new funds? Should they go towards paying down debt, boosting an emergency fund, investing for the long term, or a combination? A financial adviser helps assign a "job" to every dollar, ensuring newfound wealth works as hard as the individual does. This guidance helps steer clear of common pitfalls and seize opportunities, transforming transitional periods into launchpads to build financial freedom.

Learn more:

• What to do with a windfall
• Navigating a midlife crisis
• Your roadmap to divorce

Untangling Unseen Complexities

Sometimes, the biggest financial risks are the ones we don’t register.

An individual or couple might think their situation is straightforward, but an experienced eye can uncover hidden opportunities or potential liabilities. Take, for instance, the question of "should I pay off the mortgage or invest elsewhere?" The "right" answer isn't universal; it depends on a myriad of personal factors like probable interest rates, possible investment returns, personal aims, and personal comfort with debt. A financial adviser can help illuminate these areas, preventing expensive oversights.

It's common for advisers to find clients, especially those with grown children and a paid-off home, still paying for hefty, unnecessary life insurance policies. In areas such as this, a professional review can often lead to significant annual savings.

Building a Network of Excellence

Financial life isn't just about investments; it intersects with legal, accounting, insurance, and estate planning matters. A good financial adviser acts as a central hub, connecting individuals with trusted professionals. This ensures all aspects of wealth are coordinated and optimised.

The Calm in the Financial Storm

Markets fluctuate. Economies wobble. Natural disasters happen. Politicians lie.

These are all facts of life, and for many, it triggers emotional responses that can derail even the best-laid financial plans. If you didn't bat an eyelid during the 2008 financial crisis or during the pandemic outbreak, perhaps you're one of the rare few who doesn't need emotional guidance. For the rest of us, an adviser offers a crucial source of calm and objective perspective. They remind us that investing is a marathon, not a sprint, and help resist the urge to sell low or buy high out of fear or greed. This behavioural coaching, as mentioned earlier, is priceless – especially when it stops you from making decisions you'll regret later. After all, if the market's having a tantrum, you need a grown-up in the room.

Learn more:

• The worst mistakes to avoid in a market downturn
• How to recession-proof your finances
• Investing in a downturn
• Who wins in a downturn?

Crafting Your Personal Financial Roadmap

Whether in your twenties juggling student loans and KiwiSaver, or approaching retirement wondering if funds will last, a financial adviser helps define and prioritise goals. They assist in developing a clear, actionable roadmap, outlining the steps to achieve aspirations. For those nearing retirement, critical questions like "How much income will I have?" and "Will my funds last as long as I do?" become paramount. A financial adviser can provide clear answers based on a unique situation, giving the confidence to embrace golden years.

Learn more:

• Why winners win, and how to be one of them
• The number one reason your money isn't growing‍

Who Might Not Be the Right Fit for a Financial Adviser?

Not everyone needs a financial adviser.

While the benefits of professional financial guidance are clear, it's equally important to acknowledge that it's not a universal solution. An effective client-adviser relationship requires commitment and an open mind. So, who might find themselves better off going it alone, or perhaps just not ready for an adviser?

• If you're fundamentally unmotivated to engage with your finances, even with expert help, a financial adviser might struggle to make a lasting impact. Financial planning isn't a magic wand; it requires participation. If your default setting is to bury your head in the sand whenever a bank statement arrives, even the most patient financial adviser will face an uphill battle.
• Those unwilling to act on advice, even when it's grounded in sound principles and tailored to their situation, clearly won’t benefit. Financial advisers offer insights, highlight risks, and suggest paths based on years of experience and market knowledge. If you're determined to follow every hot tip from a relative or insist on "investing" in the latest meme stock despite warnings, you might find professional guidance frustrating. It would be a bit like hiring a personal trainer and then refusing to do any squats, you’d be paying for expertise you're not utilising.
• If you’re struggling financially, in a host of bad debt, then a financial adviser might not be right for you. This is where similarly named budget advisers come to the fore. Budget advisers can work with you to form better money habits, repay bad debts, and perhaps most importantly can help identify any non-financial matters which might be the root cause of your trouble. Best of all, budget advisers are usually free, as providers of this service are commonly charitable organisations who often receive taxpayer funding.
• For the consummate DIY enthusiasts who relish spending their entire weekend analysing obscure stock prices, building intricate spreadsheets, and generally treating their personal finances as a complex hobby, an adviser might feel redundant. For these highly engaged, self-sufficient individuals, the thrill of the chase and the satisfaction of uncovering their own "hidden gems" can outweigh the benefits of external advice. They truly enjoy the process, even if they sometimes miss a trick or two that a professional might spot. However, for everyone else, the time saved and the enhanced outcomes from delegating this complexity are typically invaluable.

The Bottom Line: Financial Advisers Are Your Partner in Prosperity

The decision to work with a financial adviser isn't about admitting you "can't do it yourself." It's about recognising the immense value of expert guidance, tailored solutions, and disciplined action in a complex financial world. It’s about leveraging professional insight to build, protect, and grow your wealth more efficiently and with greater peace of mind.

Of course, if you’re drowning in high-interest credit card debt, that’s your first port of call, but for nearly everyone else, a complimentary initial chat could unlock significant financial advantages.

At Become Wealth, we're here to help you not just achieve your financial goals, but to exceed them. Get in touch to book your no-cost, no-obligation initial consultation. Because your financial future deserves more than just a guess.