Is It Worth Paying a Financial Advisor?

Listen to President Tim Russell and Pastor Drew Gysi explore this topic here.

While the Bible may not talk about financial advisors directly, it does have a lot to say about seeking wisdom. Proverbs 1:1-7 (ESV) says,

“To know wisdom and instruction, to understand words of insight, to receive instruction in wise dealing, in righteousness, justice, and equity; to give prudence to the simple, knowledge and discretion to the youth—Let the wise hear and increase in learning, and the one who understands obtain guidance, to understand a proverb and a saying, the words of the wise and their riddles. The fear of the Lord is the beginning of knowledge; fools despise wisdom and instruction.”

It pleases the Lord when we seek out wisdom pertaining to our investments, debts, budgets, and future plans. Remember, all that we have is really the Lord’s. We are just the caretakers of it all.

Now, you may see the upcoming words as a shameless plug for our services, but we promise that this is not the case. Many “DIY” investors publicly state that there is no need to pay a professional advisor because you can do everything yourself, or you can do it through what is now called “robo-investing” and AI (artificial intelligence) software.

But in this article, we wanted to figure out if it is WISE to pay a financial advisor to partner with you in stewarding your assets. How can having a financial advisor impact your investments, both from a numerical perspective and an emotional perspective?

What Does a Financial Advisor Actually Do?

They are responsible for:

Actively managing your investments
Connecting the dots between your estate, tax, insurance, and investment plans, understanding how they impact one another.
They help reduce tax liabilities and maximize returns
They assess your future financial plans to help figure out if you’re on the right track to reach your goals. If not, they offer advice on how to adjust day-to-day living to get on that right track.
Financial Advisors create custom tailored plans to help your investment growth match your future plans

A Financial Advisor is responsible for more than just suggesting investment options or products. They typically manage investor emotions as well, including fear and greed.

The Emotional Impact of Having a Financial Advisor

Emotions can impact your investing habits, for better or for worse. “In many cases, we make poor financial decisions when experiencing panic or anxiety due to personal or widespread events.” – Carl Richards

Excitement When Stocks are High & Climbing – Investors may feel excited, and possibly become greedy when their investments are doing well, and increase their risks.
Anxiety when Stocks are Low & Dropping – Investors may feel scared when their portfolios are dropping, and they may sell assets at a loss, or even miss out on potential gains when the market rebounds

Having a Financial Advisor helps act as a barrier between your emotions and your portfolio. They can double check your thinking when you want to increase your risk or talk you off the ledge when you want to sell at a loss.

A Financial Advisor can help you keep your focus on long-term return. It can be easy to see current losses as devastating. But an advisor will help remind you that your investing is for the long-term. Past performance is no guarantee of future results, but we typically see markets rebound after times of downturn with tremendous growth. They can help keep your emotions from driving your decisions that will have a long-term impact.

The Financial Impact of Having a Financial Advisor

The cost of paying a Financial Advisor

Approximately 1% of your portfolio.
If they do a good job of managing and growing your assets, they get a raise.
If they do not, or there is a market downturn, they take a pay cut!

The average return of paying a Financial Advisor

“Vanguard, one of the world’s largest brokerage firms, has worked on this question for years. In a 2019 whitepaper, the firm says that the value of its expert advice can boost returns by 3% per year. A study by Russell Investments, a large money management firm, agrees with Vanguard’s basic stance. Russell says a good advisor can increase your yearly returns by 3.75% on top of what one could do on their own.” (The Balance)
Year over year, a 4% gain on top of what you could do on your own could lead to impressive yields over time.

The Impact of Having a Christian Financial Advisor

The emotional impact of having a CHRISTIAN Financial Advisor:

They become “part of their family, ” for they know a lot of what they do, and how they live.
They are an outside voice of reason when the challenging times come.
They become a trusted guide when family life or dynamics change, as in illness and even death.
They hurt, cry, and pray when these difficult days come upon a family!

The ability to invest in Biblically Responsible Investment models.

Investments are sought with wisdom and seeking the Lord. Investments can be based on the values of the investor! In our BRI models, we can reduce or eliminate “sin stocks” so that you can honor the Lord with how you are caring for His resources by not investing in what is offensive to Him!

The Reality of Financial Advisory Firms

They have to be profitable businesses, so many firms have a required ‘minimum’ in order to invest with them. It may not be financially feasible for the advisory firm to manage your assets if you do not have enough to cover their expenses and overhead.

If you are not at their minimum account size, there are things you can do in the meantime if you can’t hire a financial advisor:

Not everyone needs an advisor, but everyone needs advice. (Free Personal Stewardship Review)
Invest using an online firm until you have substantial assets and then speak to a financial professional to fully manage and care for your assets.

Things to Avoid:

Day-trading using smart-phone apps.
Failing to diversify by putting all your eggs in one basket.
Continuing to “navigate your own financial ship” when you have adequate assets and your knowledge and wisdom of investing is limited.

Remember the principles from Proverbs 1:1-7:

“Know wisdom and instruction, understand words of insight, receive instruction in wise dealing…
…Let the wise hear and increase in learning, and the one who understands obtain guidance…which would include hiring someone that has more knowledge to guide you…and your finances!
…The fear of the Lord is the beginning of knowledge; fools despise wisdom and instruction…”

Hiring a Christian financial advisor is a great way to seek Godly wisdom regarding your financial journey. It can help manage a multitude of problems that you may experience over the course of your life, such as emotions during market downturns, or how much risk you should take on. Don’t feel like you have to take it on yourself. Remember, the wise seek instruction and guidance. The fool despises wisdom and instruction!

After reading this article, do you think you need to talk with a financial advisor, but you’re worried about the initial or consultation cost?

We offer FREE Personal Stewardship Reviews with an experienced financial professional to help you take your next steps in stewarding what the Lord has put into your care. You can do it in-person or we can do it virtually! We would be more than happy to answer any questions, and give you professional and godly counsel and advice in your stewardship journey.

Material presented is property of The Stewardology Podcast, a ministry of Life Financial Group and Life Institute. You may not copy, reproduce, modify, create derivative works, or exploit any content without the expressed written permission of The Stewardology Podcast. For more information, contact us at Contact@StewardologyPodcast.com or (800) 688-5800.

The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations. Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

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