Just Ask Jason℠ - How would you describe the benefits of a financial adivsor?

Jason Howell |


Q: Dear Ask Jason, on your website you note that you serve "First Generation Wealth." From reading your "About You" section I can see that doesn't just mean first generation Americans but also people who are first in their family to make or save 6 or 7 figures. That said, I come from the Southeast Asian (Indian) community where many of my peers are highly educated but know very little of what to do with our income (besides show it off). I would like to explain to them the benefit of working with a financial advisor but the concept is literally foreign to them. How would you describe the benefits versus the costs? Signed, A Penny Saved is a Penny Earned

A: Dear A Penny Saved is a Penny earned, what you describe is very common amongst people who are earning more money than they are used to saving. People who are new to earning a high income often have few examples of what to do with it from their family and friends circle. First generation communities often hear about buying real estate but if that's out of reach what else is there to do they ask? Typically, they spend. Savings accounts seem boring and the stock market seems like a casino. Both characterizations are partially right. FDIC insured bank savings accounts are without the risk - up to a $250K limit - and no risk means low returns and "boring." Higher returns are available in the stock market but you've seen (and heard about) volatility that can destroy wealth (i.e. casino). So what's the answer? Portfolio  (wealth) management.

The better financial advisors/financial planners/wealth managers will take a comprehensive view of every asset in your portfolio (dollars, cents, real estate, crypto, etc.). They'll then ask you questions about what you want from your life and what worries you. They'll take those goals and concerns, look at your income, expenses, debt and savings and help you draw up a plan. Yes, your life (and your interests) will change over time, but when your life changes so will your plan. You will learn a process for recalibrating how you save, spend and invest that follows your life (rather than your life following your money). This isn't just about feeling good either. Vanguard commissioned a study to outline an advisors financial value to a client. Their 2001 study (updated in 2022) reported more than 3% net return of value to the customer who uses a financial planner versus one who does not. The average professional advisory fee is 1% of assets under management so a 3% net return is quite a bit of "alpha." Warren Buffet once said,

"Price is what you pay, value is what you get." 

- Warren Buffet


I hope this helps. 

Do you need a financial planner? If you're asking, you could probably benefit from having an initial conversation with a good one. In fact, talk to me and a few others. Ask about the categories of finance they cover and how they charge. There are all kinds of business models. Just find the person and the model that gives you a good feeling. Trust your judgement.