The True Value of a Financial Advisor: What You Need to Know
- Mark Fonville, CFP®
- May 26
- 14 min read
High-net-worth investors face complex decisions as they approach retirement, and the evidence shows that working with a financial advisor can yield significant benefits.
Below we summarize key advantages – both quantitative and qualitative – of hiring a financial advisor versus a DIY approach, with data from recent reputable studies.
Key Takeaways: The Value of a Financial Advisor
Financial advisors may boost annual portfolio returns by 3%–5% through smart planning, tax strategy, rebalancing, and behavioral coaching—using both offensive strategy (optimizing investments) and defensive strategy (minimizing tax liabilities and managing risk) to significantly outpace DIY investors over time.
A financial advisor supports clients throughout their financial journey, helping them adapt to changing goals and circumstances while providing ongoing guidance and expertise.
Behavioral mistakes may reduce wealth by nearly 30%, but a financial advisor helps clients avoid emotional decisions like panic selling and chasing performance.
Advised investors build 3× more net worth and 4× more investable assets than non-advised investors, according to research—highlighting the long-term financial value of professional advice.
Tax-efficient investing and withdrawal strategies may preserve 1%–2% more annually, which compounds to hundreds of thousands in additional wealth for high-net-worth investors.
Estate and legacy planning guidance helps preserve wealth, minimize taxes, and avoid family conflict—yet nearly 30% of investors still lack a formal plan.
Retirement income planning with an advisor may increase income by 20% or more, helping clients retire earlier, claim Social Security optimally, and avoid outliving their money.
Financial advisors act as a personal CFO, coordinating investments, taxes, estate plans, and business interests to reduce complexity and give clients greater peace of mind.
ROI, Asset Allocation, and Net Worth Outcomes with an Advisor vs. DIY
High-net-worth individuals who get professional advice often see measurably better financial outcomes over time. Advisors typically add significant value by focusing on the main value drivers of optimizing investments and minimizing tax liabilities.
For example, one extensive study found that investors who work with a financial advisor accumulate nearly 3× the net worth and 4× the investable assets of otherwise similar non advised individuals. This highlights how financial advisors add value compared to those without professional guidance. In the same research paper, 61% of advised investors “strongly agreed” that their advisor had a positive impact on their investment performance.
Vanguard’s research likewise estimates that following wealth management “best practices” with an advisor can add about 3% in net annual returns to a client’s portfolio (after the advisor’s fees). The two primary categories of value are optimizing investments (offensive strategy) and minimizing tax liabilities (defensive strategy).
Similarly, Russell Investments’ 2022 analysis quantified a holistic advisor’s benefit at roughly 4.9% per year of added investment returns through a combination of better planning, coaching, rebalancing, and tax strategy.
These studies and analyses rely on gathering comprehensive data to assess advisor impact, but often the model employs proxies and reasonable projections to forecast financial scenarios and estimate lifetime value and final net worth. Technical finance limitations impact the accuracy of these projections, and past performance is not a guarantee of future results.
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Over the long run, even a 2–4% annual improvement can compound to dramatically higher ending wealth – a key reason many wealthy investors attribute superior ROI and net-worth growth to professional advice.
Behavioral Coaching and Fewer Investment Mistakes
One of the most critical (and often underappreciated) values of an advisor is as a behavioral coach who helps investors avoid destructive mistakes. Behavioral finance research shows how internal factors and emotional biases can derail financial success if not properly managed. Consistent data shows that the average DIY investor significantly underperforms their own investments due to timing errors – buying high, selling low, and chasing trends.
Morningstar’s Mind the Gap study (2014–2023) revealed that the average fund investor underperformed the very funds they invested in by 1.1% annually, primarily due to poor market timing—buying high and selling low.
While that might not sound like much, the long-term impact is significant. Over time, this “behavior gap” can erode over 29% of an investor’s potential wealth.
Consider John and Betty, who start with a $1.5 million portfolio. If they earn a 6.3% average annual return over 25 years with no withdrawals, their portfolio would grow to $6.9 million. But if they had avoided common behavioral mistakes and earned just 1.1% more annually—achieving a 7.4% return instead—their ending balance would have reached nearly $8.94 million.
That’s a difference of $2 million, or a 29.35% increase in wealth from this hypothetical scenario, simply from making better investment decisions—and that’s exactly where a financial advisor adds value. Both behavioral finance and technical factors influence financial decisions, leading to varied financial choices that can significantly impact long-term outcomes.
Advisors add value by preventing panic selling and keeping clients disciplined; Vanguard notes that during periods of market euphoria or panic, good advisors can save clients “tens of percentage points” of performance that would have been lost to emotional reactions. Understanding a client's risk tolerance is key to developing a plan that avoids such obstacles and supports long-term financial success.
Research confirms the impact: Households that kept working with a financial advisor during a volatile period (2010–2014) saw their assets grow +16.4%, while those who dropped their advisor saw only a +1.7% increase.
Similarly, advised individuals in the 2007–2009 downturn experienced about 20% less wealth volatility and a 6% higher risk-adjusted return than those without advice.
In short, an advisor’s guidance helps investors stick to a sound plan and avoid costly missteps – arguably contributing the single largest increment (often 1–2% or more per year) of an advisor’s total value.
Time Savings and Peace of Mind
In our experience at Covenant Wealth Advisors, we find that many affluent investors simply don’t have the time or desire to manage complex financial matters day-to-day, and hiring an advisor provides peace of mind that an expert is watching over their wealth.
Moreover, freeing up an individuals time may allow them to focus on getting more enjoyment out of life or being more successful in their career.
A Vanguard survey of 1,500 investors found that clients with a traditional advisor are 20% less likely to feel they have the time, willingness, and ability to manage their own portfolios, which directly correlates with a “high peace of mind” when working with a professional.
In practice, outsourcing investment and financial planning frees up substantial personal time – no more hours spent poring over markets or tax law – allowing clients to focus on family, career, or enjoying retirement. Working with a financial advisor is an ongoing process that adapts to clients' evolving needs and circumstances.
Notably, most DIY investors lack confidence in their financial handling: in one survey, of the one-third of Americans who handle all their own investments, only 33% said they feel confident doing so.
By contrast, advised individuals report greater confidence and security. In a global investor study, people ultimately ranked “sense of security/peace of mind” and personal financial understanding as the top benefits they receive from their advisor relationship – even above investment performance.
Knowing a trusted expert is coordinating one’s financial life can reduce money-related stress (which 52% of Americans admit struggling to control and bring immense peace of mind alongside the hard numbers.)
Tax Planning Advantages: Minimizing Tax Liabilities (Keeping More of What You Earn)
For high-net-worth investors, tax planning can make a huge difference in net returns – and advisors excel at optimizing taxes across investments. It’s often said that “it’s not what you make, it’s what you keep.” Professional financial advice and accounting advice are essential for navigating complex tax laws and optimizing tax liabilities.
Without careful tax management, investors can lose a substantial chunk of returns to Uncle Sam. For instance, the average investor in a typical (non-tax-managed) U.S. equity fund gave up 2.14% per year of their returns to taxes, whereas investors using tax-managed funds lost only 0.92% – meaning roughly 1.2% in annual return was preserved through tax-efficient strategies. Minimizing tax liabilities is a key way advisors deliver significant value to both new and seasoned investors.
Over time, that difference is enormous, especially on a large taxable portfolio.
Advisors add value by locating assets in the most tax-advantaged accounts, harvesting tax losses, and timing withdrawals to minimize tax drag. Vanguard’s analysis suggests that savvy asset location and withdrawal planning can add on the order of 0.5%–1% in yearly net return for many clients.
And beyond portfolio tactics, advisors guide strategies like charitable giving, Roth conversions, or business-ownership tax breaks that DIY investors may overlook. (Notably, Vanguard points out that their 3% advisor alpha estimate excluded advanced services like detailed tax-loss harvesting and charitable or estate planning, which can add significant additional value on top.)
Surveys also show clients truly value this help – behavioral research found that while investors often underestimate the need for behavioral coaching, advisors themselves underestimated how important tax-efficient strategies are to clients’ satisfaction.
In summary, effective tax planning under an advisor can boost after-tax returns and ensure wealth is managed with “what you get to keep” as a priority. Clients should seek personalized tax advice from qualified professionals to complement the strategies discussed.
Estate Planning and Legacy Optimization
High-net-worth families tend to have significant legacy and estate considerations, and advisors play a key role in optimizing wealth transfer to the next generation. We are entering an era of an unprecedented “great wealth transfer”: roughly $84 trillion is expected to be passed down through estates in the coming decades.
Yet many are unprepared – According to JustVanilla, 28% of investors have no wealth transfer plan in place, and 83% worry this massive transfer won’t go smoothly. Poor or absent estate planning can be very costly: more than a third of Americans (35%) say they’ve witnessed family conflict due to lack of a clear estate plan and settling an estate in probate can eat up 5–10% of the estate’s value in legal costs and fees.
A good financial advisor will work with estate attorneys to establish wills, trusts, and gifting strategies to minimize taxes (like estate or inheritance taxes) and ensure your assets pass to heirs as you intend. Advisors also help optimize beneficiary designations, life insurance, and charitable bequests as part of a holistic legacy plan.
A well-crafted estate plan should reflect your personal values and long-term wishes for your family and community. Notably, while the very wealthy are more likely to have an estate plan than the general public, even among those with over $25 million, 16% have no will or estate plan – a risky omission that professionals can help close.
By coordinating estate attorneys and using vehicles like trusts, advisors help high-net-worth clients preserve family wealth, avoid unnecessary tax erosion, and set up a legacy that reflects their wishes.
The value of this guidance is not only measured in dollars saved, but also in preventing family disputes and providing peace of mind that one’s loved ones will be taken care of according to plan.
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Retirement Income Planning and Optimization
For affluent individuals nearing retirement, an advisor’s expertise can be the difference between a merely sufficient retirement and an optimal one. One immediate benefit is greater retirement readiness and confidence.
A 2024 survey (Northwestern Mutual.)) found Americans who work with a financial advisor plan to retire about 2 years earlier on average than those who don’t (age 64 vs. 66), and they have saved more than double for retirement (a median of $132,000 saved vs. $62,000 without an advisor).
Crucially, 75% of those with an advisor believe they’ll be financially prepared for retirement, compared to just 45% of those without.
Beyond confidence, advisors bring technical expertise to maximize sustainable income.
They craft strategies for optimal Social Security claiming, pension elections, and drawdowns that DIY retirees often miss. According to CBS News, remarkably, about 96% of retirees claim Social Security at suboptimal times, collectively forfeiting an estimated $3.4 trillion in lifetime benefits – roughly $111,000 per household on average – by claiming too early or without guidance. An advisor can help avoid being part of that 96%.
Advisors also devise prudent withdrawal plans (e.g. the “4% rule” adjustments, dynamic spending strategies, or annuity inclusion) to ensure you don’t outlive your money. As part of a comprehensive financial plan, advisors can help clients access penalty free withdrawals from retirement accounts, such as a Roth IRA, by navigating complex rules and optimizing cash flow strategies.
Morningstar research published by the financial planning association shows that by making a series of smart retirement planning decisions – from total wealth asset allocation to dynamic withdrawal and tax-efficient allocation – a retiree can generate 22.6% more expected retirement income versus a basic static approach.
This uplift is akin to getting an extra ~1.5% investment alpha every year of retirement!
In practice, that could mean the difference between, say, $100,000 vs. $122,600 of annual income in retirement for the same assets. A financial advisor brings all these pieces together into a coordinated retirement plan that optimizes income streams (Social Security, investments, pensions), mitigates risks like outliving assets or sequence-of-return risk, and adjusts the plan as life unfolds.
The result is not only a higher ROI on your retirement dollars, but also confidence that your retirement lifestyle is on solid footing.
Coordination of Complex Financial Matters
High-net-worth individuals often have complex, interlocking financial matters – investments across accounts, businesses, properties, taxes, trusts, charitable endeavors, etc. The diverse and personalized nature of financial advice required for these clients means that advisors must tailor their approach to each client's unique financial needs.
A key value of a financial advisor is acting as a “financial quarterback” to coordinate all these moving parts. In practice, wealthy families tend to assemble a team: indeed, 90% of Americans with $5M+ in wealth use at least one financial professional, and 67% of the wealthy employ multiple advisors (for example, a wealth manager, an attorney, an accountant, and perhaps a specialist planner). This, is according to Investment News.
A primary advisor can liaise with your CPA on tax strategy, with your attorney on estate structuring, and with other specialists to ensure everyone is on the same page. This coordination is crucial – the Bank of America Private Bank study found that while almost all rich investors are satisfied with their advisors, only 46% were “highly satisfied” with how well their various advisors communicate with one another.
In other words, there is huge opportunity (and demand) for an advisor who can integrate the advice from different domains and deliver a cohesive plan. A thorough economic analysis is often necessary to coordinate these complex matters effectively, ensuring that the personalized nature of each client's situation is addressed.
We believe that this is one of the reasons that our services are in such high demand at Covenant Wealth Advisors.
High-net-worth clients also often face unique scenarios (executive compensation plans, sales of businesses, complex trust arrangements, etc.) that require knowledgeable oversight. A good advisor brings experience in handling these complexities, ensuring that one decision (like exercising stock options or selling real estate) is executed in a way that considers tax, legal, and portfolio implications holistically.
By having one trusted point-person who understands the “big picture” of your finances, you get streamlined decision-making and confidence that no part of your wealth is overlooked.
This comprehensive coordination is a qualitative benefit that might not show up on a performance report, but it saves time, reduces errors, and adds immense value for high-net-worth families with multifaceted finances. (Source: Vanguard and Investment News).
Bottom Line: What is a Financial Advisor Really Worth?
When it comes to quantifying an advisor’s value, the numbers (higher net returns, greater wealth accumulation, fewer costly mistakes, tax savings, optimized retirement income) are compelling – often amounting to a few percent of additional return per year or significant dollar gains, which over a lifetime can far outweigh the typical advisory fee.
The value of a financial advisor is most readily apparent when considering how they help clients achieve their financial goals through a comprehensive financial plan tailored to the client's portfolio and risk tolerance.
But beyond the numbers, high-net-worth investors should also weigh the qualitative benefits: peace of mind, time freed up, confidence in your plan, and expert guidance through life’s financial complexities. Advisors help clients manage risk and adapt to changing market dynamics, external factors, regulatory policies, and technological innovation.
As one large investor survey summed up, clients measure the value of their advisor not just in market-beating returns, but in the “security and peace of mind” they gain from the relationship. In certain industries, such as those dependent on imported materials essential for solar panel production, advisors must also consider trade wars and supply chain risks when strategizing.
In a world where investment markets, tax laws, and personal circumstances are always changing, a competent financial advisor can be an invaluable partner – helping you avoid pitfalls, capitalize on opportunities, and achieve the ultimate goal of financial well-being in retirement.
Each individual’s situation is unique, but a trusted advisor’s worth is best judged in the better outcomes and confidence you achieve with their guidance. The main value drivers and primary categories of advisor value are optimizing investments and minimizing tax liabilities, and a financial advisor strategizes to deliver substantial value and significant value over the long term.
Are you interested in seeing how Covenant Wealth Advisors can bring value to your individual financial situation?
Value of a Financial Advisor FAQs
What is the value of a financial advisor? A financial advisor helps grow and protect your wealth through personalized planning, investment management, tax strategy, and behavioral coaching.
Is a financial advisor worth the cost? Yes—research shows advisors can add up to 3% or more in net annual returns, often far exceeding their fees.
How do advisors improve retirement outcomes? They optimize Social Security timing, income strategies, and portfolio withdrawals to increase retirement income and reduce risk.
Can a financial advisor help lower my taxes? Absolutely—advisors use tax-efficient investing, asset location, and strategic withdrawals to minimize your tax burden.
What’s the biggest difference between DIY investing and using an advisor? DIY investors often make emotional mistakes, while advisors provide discipline, structure, and better long-term results.
About the author:
CEO and Senior Financial Advisor
Mark is the CEO of Covenant Wealth Advisors and a Senior Financial Advisor helping individuals age 50+ plan, invest, and enjoy retirement comfortably. Forbes nominated Mark as a Best-In-State Wealth Advisor* and he has been featured in the New York Times, Barron's, Forbes, and Kiplinger Magazine.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice. These studies and analyses rely on gathering comprehensive data to assess advisor impact, but often the model employs proxies and reasonable projections to forecast financial scenarios and estimate lifetime value and final net worth. Technical finance limitations impact the accuracy of these projections, and past performance is not a guarantee of future results.
