By Kyle Louvar, CFP®, AIF®
Many clients delay partnering with a financial advisor because they believe their services are too expensive. But this couldn’t be further from the truth! Working with an advisor often helps you save money by eliminating unnecessary expenses and redirecting those funds toward long-term financial goals. Here are four ways financial planning can pay for itself by uncovering opportunities to reduce or eliminate costs:
Refinancing is not free. Many people were convinced to refinance in the wake of the pandemic since interest rates were historically low. But what clients often fail to realize is that there are costs associated with refinancing even at near-zero interest rates.
In order to understand if you are truly getting a deal and saving money, you will need to compare the total closing costs to the total amount saved by lowering your interest rate. You’d be surprised to learn that it might take you several years to break even from the cost of the fees, or you might not break even at all. This is where an advisor can add value.
He or she can run the numbers for you and project different scenarios to find the refinancing terms that make the most sense for you. Maybe it doesn’t make sense for you to refinance or maybe you should take a slightly higher rate to reduce the closing costs. Either way, a financial advisor can help you make the best decision for your unique situation.
Mutual Fund Fees
Mutual funds are one of the most popular ways to invest in a large variety of assets with relative ease. But mutual funds usually charge much higher fees than other investment options, and these fees can have a big effect on returns over time.
To make matters worse, fees are usually charged regardless of how well the fund performs, and, at any given time, a significant portion of investment returns could be lost to: (1)
- Management fees
- 12b-1 fees
- Sales load
- Redemption fees
- Exchange fees
- Account fees
- Purchase fees
What many people don’t realize is that ETFs offer the same exposure to a wide range of investment options but with fees that are significantly less. They are often much more cost-effective and can help boost your returns over time.
Insurance premiums are another area where financial advisors can have an impact. Whether it’s life insurance, homeowners’ insurance, or auto insurance, it’s not uncommon for clients to be overpaying for their coverage—sometimes by as much as $300 to $500 per year.
In our comprehensive risk management assessment, we review our clients’ existing policies to determine if they have too much or too little coverage. From there, we make specific recommendations based on each client’s unique needs.
Clients can either shop for insurance policies on their own or utilize our trusted referral partners. Either way, we help clients find the right coverage and redirect any cost savings back into your long-term financial plan.
Taxes & Fees When Trying to “Beat” the Market
There is potentially a cost to investing too aggressively, specifically in the form of trying to time or “beat” the market and winding up with unnecessary taxes as a result. Quite often, attempting to beat the market and chase the latest new stock results in taking greater risks, greater trading costs, greater taxes, and sub-par results. Not only will you have to contend with commissions on each purchase and sale, but you could also be driving up your tax liability by subjecting yourself to short-term capital gains. These are taxed at ordinary income rates and can add up quickly if you are constantly buying and selling in search of a higher return.
If you want to see growth (and less taxes and fees) in your portfolio, it’s important to stick to your investment strategy and ignore the short-term noise. Clients have historically been much better served by focusing attention, time, and energy on things they can manage, such as how much risk to take in the first place, rebalancing periodically, having realistic growth rate assumptions, and developing an investment strategy as part of a comprehensive financial planning process.
Are You Paying Too Much in Hidden Fees?
If some of these hidden fees sound familiar, you are not alone. We have helped many clients reduce or eliminate these obstacles and more.
At Guided Capital Wealth Management, we utilize our proprietary process, The Paradigm FORMula, to help you create a dynamic plan that can maximize your retirement potential and help keep you on track to achieving your goals throughout your lifetime. Schedule a FIT meeting by contacting us at (832) 975-0711 or by email at email@example.com to learn if we are the right people to guide you on your financial journey.
Kyle Louvar is the CEO and Wealth Management Advisor for Guided Capital Wealth Management, a fiduciary financial advisory firm offering fee-based advice, guidance, and education. After seeing the impact that the 2008 financial crisis had on families, Kyle became fully committed to helping his clients develop a financial plan that changes as their lives unfold and their needs evolve. Spending nine years working for one of the largest brokerage firms on Wall Street, Kyle holds a high value for process, expertise, objective advice, and customized solutions. His goal is to help his clients experience confidence in their financial future through a disciplined process of financial planning, investment management, and sound financial decision-making.
Kyle graduated from New Mexico State University, where he was a proud 4-year letterman in football for the Aggies and where he’s sat as an NMSU Foundation board member since 2015. Kyle holds the CERTIFIED FINANCIAL PLANNER™ and Accredited Investment Fiduciary® certifications. When not helping his clients, Kyle enjoys spending time with his wife, Nicole, and their two daughters. You can often find him coaching his daughters’ softball teams, playing golf, cooking, and traveling. To learn more about Kyle, connect with him on LinkedIn.