Is it really worth paying someone for financial advice?
Although most Americans believe they are not saving enough for retirement, few are able to make lasting changes to their savings strategies on their own. In a recent survey by the Employee Benefits Research Institute, 38 percent of workers said they fail to participate in their employer sponsored retirement plan, and a mere 14 percent of workers report being confident in their ability to retire at all.
Working with a financial advisor to establish a long term savings and investment plan is one of the best ways to avoid this common retirement pitfall. The question, however, is — are consumers of this financial advice receiving sufficient value from the guidance they're paying for? Few studies exist that quantify the value of financial planning, but recent research suggests that investors who engage a professional dramatically increase their odds of success in retirement. In a longitudinal study published in 2014 in the Journal of Financial Planning, investors who worked with a financial advisor, on average, enjoyed a 50% increase in their total retirement savings when compared to individuals who did not engage a professional.
Researchers found consistent evidence that working with a fee-based financial advisor, and having a well documented plan, can dramatically improve retirement outcomes. With fewer Americans retiring with pension plans or defined benefit plans, it's incumbent upon everyone to ensure they have a savings strategy in place to protect themselves and their families beyond their working years. Fortunately, we now know that working with a professional financial advisor can help.
Sources: "A Comparison of Retirement Strategies and Financial Planner Value," Journal of Financial Planning, November 2014.