Bruce Helmer and Peg Webb

The business of giving financial advice has changed dramatically over the past 30 to 40 years. When we started, the relationship was mostly transactional: Investors came to you to help them pick stocks and manage portfolios. At most firms, the emphasis was on “beating the market” and finding the next “hot stock.” Financial planning was nowhere to be found.

Most advisers today offer a new, distinctly different model for client engagement — one that consolidates every piece of an investor’s financial life into one place so that it can be managed more holistically.

The evolution

It may help to understand how far the industry has come since the 1970s and 1980s.

Older investors may have worked with stockbrokers in the past to help manage their money. This was a very different world. In the old days, the emphasis at most brokerage firms was on salesmanship and returns. Goals were very much directed to a future point in time — setting retirement at 65, for example, and gearing a portfolio around accumulation. Wall Street relied on armies of analysts who performed technical research into stocks, and often the process was rife with conflicts as the analysts supported the firm’s investment banking business. Overall, the process was transactional and performance-driven.

Since then, most practitioners have moved away from selling stocks or funds to an advisory model that is oriented toward helping investors achieve their goals. It views wealth not as an end point but as a fluid journey, guided by a unified, holistic, comprehensive plan that’s tailored to each client’s individual situation. To address their clients’ more complex wealth management challenges, today’s advisers draw not so much on individual technical training and processes but rather on the collective wisdom and perspective of small adviser teams who focus on addressing clients’ individual needs.

How advisers add value

We’ve found that forming a relationship with each client is a unique experience. No two clients are alike, so it’s important that there’s the right fit between what clients need and the adviser’s range of services.

People usually decide to hire an adviser when they settle into a career, start a family, or experience some other major life event. With busy lives, many find they don’t have the time or inclination to manage their finances themselves.

It’s not all about investment returns. The greatest value that an adviser can add is in seven areas of financial planning:

1. Budgeting

You shouldn’t be investing until you’re confident you can stick to a monthly budget and manage debt. A good adviser will help you construct a manageable budget, let you know when your spending exceeds your means, and advise you when you need to dial it back. Holding you accountable to your vision of the life you want is a major benefit of working with an adviser.

2. Investment Access

Larger advisory firms may be able to offer you investment options at a lower cost than you might get on your own, as well as access to difficult, highly rated, hard-to-access managers that may be closed to new investors. If an adviser is charging you 1% of your assets each year to manage your money, all in, you may recoup as much as half of that amount in terms of lower total costs.

3. Asset allocation strategy

An adviser’s fee should include creating an asset allocation strategy tailored to your individual goals and risk tolerance. You receive value when the adviser monitors your account and manages any future adjustments to keep that allocation strategy on target — either quarterly or annually. This can save you valuable time.

4. Retirement planning

Many investors don’t understand the different ways that various retirement-focused accounts can be used in income planning: 401(k)/403(b), traditional IRA, Roth IRA, income ladders, annuities, or taxable accounts. When an adviser helps you diversify your tax exposure, you may be better positioned to make your money last longer in retirement.

5. Asset protection

Once you have accumulated financial and other types of assets, you need to manage risk. An adviser can help you purchase various types of insurance, including property and casualty, life, liability/umbrella, and special policies or riders to cover valuable art or collectibles.

6. Cohesive tax strategy

Many investors don’t understand the different tax treatments that apply to 401(k), traditional or Roth IRAs, or taxable accounts — or how to diversify their tax exposure. Advisers can help you decide when to take Social Security benefits or required minimum distributions (RMDs) — which can be surprisingly complicated, depending on your situation.

7. Estate and gift planning

A full-service advisory firm should be able to quarterback the creation of your legacy planning and gifting strategy — with input from your attorney and tax professional. This includes the creation of trusts to pass your wealth efficiently to future generations or to distribute gifts of cash or securities to your loved ones or favorite causes in a tax-smart way.

What you should expect

Today’s financial advisers are able to offer much more than simply recommending a basket of stocks or mutual funds and seeing which way the market takes you. The adviser who ultimately earns your trust and business should carefully and thoughtfully review your situation to make sure you are fully supported in expressing your values, gaining investment access, developing a resilient asset allocation strategy, fine-tuning a cohesive tax strategy, and carrying out legacy wishes with estate and gift planning.

Perhaps most importantly, your adviser should work with you to re-establish goals and reinforce the importance of structure and sticking to your plan — especially when markets get choppy, or life throws you curveballs.

Related Articles

Your Money: Women and wealth: a values-based approach to planning

Your Money: Don’t treat your 401(k) like an ATM

Your Money: Train your brain to make better money decisions

Your Money: Squaring values with your investments

Your Money: Timely milestones on your retirement journey

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no guarantee that asset allocation or diversification will enhance overall returns, outperform a non-diversified portfolio, nor ensure a profit or protect against a loss. Investing involves risk, including possible loss of principal.

Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830 AM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.