Do Wealthy Americans Use Financial Advisors?

Have you ever thought about hiring a financial advisor?

If you have a significant net worth, you’ve almost certainly received solicitations from financial advisors looking to sell you their services.

I typically receive such letters, often inviting my wife and me to a free dinner at a nearby Ruth’s Chris Steak House. Should we go, we’d doubtless have to sit through a long presentation trying to convince us to hire them.

But should we?

What Is a Financial Advisor?

“Financial advisor” is a very broad term.

I looked through a (fairly random) list of about 170 financial advisors and found 40 titles (some pros listed multiple titles).

Just for grins, here they all are (feel free to jump past the whole list!)

• Accredited Asset Management Specialist (AAMS)
• Accredited Financial Counselor (AFC®)
• Accredited Investment Fiduciary (AIF®)
• Accredited Investment Fiduciary Analyst (AIFA®)
• Accredited Wealth Management Advisor (AWMA®)
• Behavioral Financial Advisor (BFA®)
• Certified Digital Asset Advisor (CDAA®)
• Certified Divorce Financial Analyst (CDFA®)
• Certified Elder Law Attorney (CELA®)
• Certified Exit Planning Advisor (CEPA®)
• Certified Financial Education Instructor (CFEI®)
• Certified Financial Planner (CFP®)
• Certified Financial Therapist (CFT-I®)
• Certified Investment Management Analyst (CIMA®)
• Certified Kingdom Advisor (CKA®)
• Certified Private Wealth Advisor (CPWA®) 
• Certified Public Accountant (CPA)
• Certified Retirement Counselor (CRC®)
• Certified Student Loan Professional (CSLP®)
• Certified Wealth Strategist (CWS®)
• Chartered Alternative Investment Analyst (CAIA®)
• Chartered Financial Analyst (CFA®)
• Chartered Financial Consultant (ChFC®)
• Chartered Life Underwriter (CLU®)
• Chartered Retirement Planning Counselor (CRPC®) 
• Chartered SRI Counselor (CSRIC®, where SRI is sustainable, responsible, and impact investing)
• Enrolled Agent (EA)
• Financial Solutions Advisor (FSA®)
• Master of Business Administration (MBA)
• Master of Science in Financial Planning (MSFP®)
• Master of Science in Personal Financial Planning (MSPFP®)
• Master of Science in Taxation (MST®)
• Master Planner Advanced Studies (MSAP^TM)
• Military Qualified Financial Planner (MQFP®)
• Personal Financial Specialist (PFS®)
• Registered Financial Consultant (RFC®)
• Registered Investment Advisor (RIA®)
• Registered Life Planner (RLP®)
• Retirement Income Certified Professional (RICP®)
• Wealth Management Certified Professional (WMCP®)

Each of these implies a different education, training, and/or focus. 

Some are academic degrees, while others are professional certifications.

Some take years to acquire, while others can be attained through short programs.

Some get paid by the hour, others by the type of service, and yet others by commissions and/or assets-under-management fees. Some even charge a combination of the above.

Some require the professional to be a fiduciary – putting their client’s best interest ahead of their own, while others don’t (though this doesn’t preclude them from acting with professional integrity).

What Do Financial Advisors Do for You?

In the broadest terms, a financial advisor will help you manage some, most, and potentially all aspects of your money. Some examples include:

• Estate planning
• Financial planning (e.g., retirement planning, education planning, risk management, cash flow analysis, and investments)
• Investment advice and management
• Risk management and insurance planning
• Tax-reduction strategy
• Tax-return preparation

Some may also help with business planning.

Do Affluent Americans Use Financial Advisors?

A recent survey conducted online by Logica Research for First Citizens Bank asked 1000 Americans with at least $500k investable assets (putting them in the 79^th net worth percentile or higher) various questions, including several about working with financial advisors.

Of the 1000 surveyed, 764 (over 76 percent) said they worked with a financial advisor.

The answer is thus “Yes” much more often than “No.”

Of those 764, 89 percent believe their advisor helped them grow their wealth faster than they would have on their own. 

Only three percent disagreed with that (the rest had no opinion).

In my case, the answer is also yes, because I work with an accountant.

What Are the Biggest Benefits of Working with an Advisor?

Asking the 764 who work with advisors what were the biggest benefits they derived, they answered:

• Feeling better prepared for the future (66 percent)
• Reducing stress (58 percent)
• Saving time (45 percent)
• Allowing them to focus on the important things in their life (43 percent)
• Having a plan for passing on wealth to heirs (29 percent)
• Not worrying about what happens when they die (15 percent)
• Not worrying about taxes (12 percent)

Of all these, if I ever hire a CFP, for example, feeling better prepared would rank highest for me, followed by not worrying about taxes. 

I’m too much of a detail-oriented-to the-nth-degree control freak to ever feel less stress or not worry if I handed our investment management and other financial planning matters to someone else.

I’d likely duplicate their work and if my conclusions were different from theirs, they’d better have a pretty darn compelling case!

What’s the Most Important Criterion When Picking an Advisor?

All 1000 were asked what they thought would be the most important thing to consider when picking an advisor. Their answers were:

• Reputation (52 percent)
• Credentials/Certifications (48 percent)
• Fee structure (47 percent)
• Transparency (43 percent)
• Recommended by trusted people (33 percent)
• Confidentiality (25 percent)
• Personability (24 percent)
• Philosophical alignment (19 percent)

Why They Hired an Advisor

Those 764 who work with an advisor stated several reasons that led them to hire their advisor:

• Growing wealth (41 percent)
• Preparing for retirement (23 percent)
• Creating a financial plan (23 percent)
• Managing taxes (6 percent)
• Building an inheritance (6 percent) 

Personally, I’d rank them differently: transparency in the top slot, philosophical alignment, personability, reputation (especially among people I know who have similar financial circumstances), confidentiality, credentials, and fee structure.

When Did They Hire Their Advisor?

Those who work with an advisor first hired their advisor when they were, on average, 37 years old. There was some differentiation between generations – the 251 Millennials averaged age 29, the 208 Gen-Xers averaged age 36, and the 158 Boomers averaged age 43.

All 1000 were then asked what age they thought would be best to start working with an advisor. The most common answer was “Any age” at 38 percent. Another 32 percent recommend ages 26 to 40. The age range up to 25 was suggested by 26 percent. The remaining four percent thought the proper time would be at age 41 or older.

The overall average recommended age was 30.

Looking From the Other Side

I thought it would be interesting to see this from the perspective of financial advisors. 

So, I asked them.

The following are my questions and answers from several financial advisors.

Q1. In your experience, why do the wealthy use financial advisors?

Answers:

Chris Wilbratte, Echelon Financial responds, “The wealthy use financial advisors because they focus on their area of genius and delegate wealth management to advisors who are subject matter experts in their field. The wealthy want to be good stewards of their money. They often don’t have the time to focus on the markets and managing their money, so they hire advisors to ensure their money grows and is protected.”

Vincent D’Eletto, COO at Investment Insight Wealth Management points out, “Affluent Americans do use financial advisors, but their approach is often distinct from those who are still working toward financial independence. While many may seek advice on investments and retirement planning, affluent individuals tend to focus on more complex goals. These include philanthropy, managing multi-generational wealth, establishing succession plans, and fulfilling altruistic aims. For them, it’s not just about growing their assets but ensuring that their wealth aligns with their values and legacy for future generations. They seek a broader, more strategic approach that covers a wide range of financial and personal objectives.”

He continues with an example, “We’re currently working with a long-term affluent client who has already achieved financial independence. At this stage, the focus has shifted from traditional wealth building to establishing a philanthropic foundation that his family can oversee for generations. What’s particularly interesting is that he wants to remain actively involved in the investment decisions for the fund, so we’re creating a structure that allows him to guide the investment strategy while maintaining the foundation’s long-term objectives. This type of goal reflects how affluent clients often prioritize legacy planning and the integration of personal values into their financial strategies.”

Ray Prospero, Partner Advisor, AdvicePeriod agrees, “I’ve found that affluent investors choose to use a financial advisor because they tend to lead busy lives and prefer to delegate their financial management to a professional. By doing this, they are free to focus on their other priorities such as their career, family, and hobbies. Additionally, depending on the complexity of their finances, they can use the specialized expertise of their advisor to address areas such as tax planning and estate planning.”

Chris Magaña, Strategic Advisor & Principal, IMS Capital Management shares an interesting experience, “Our clients are incredibly sharp; they hire us because they know their time is better spent elsewhere, like growing their business, spending time with family, or diving into their passions. Lately, though, we’ve been attracting a different breed: business owners by day and hedge fund managers by night (or so I suspect). Their financial IQs are off the charts, and they genuinely enjoy digging into market details and Roth conversions. At first, I felt a little insecure; I didn’t believe our value proposition was strong enough for these clients, so I asked. Their responses surprised me. They said, ‘Sure, I love this stuff, but I won’t be around forever. What I need is peace of mind, knowing there’s a team I trust implicitly once I am gone.’ These folks know something about the meaning of true wealth, building a legacy with people you trust.”

Q2. What services do advisors offer beyond those listed above?

Answers:

Carman Kubanda, CFP^®, ChFC^®, Financial Planner at Innovative Wealth Building mentions one such service, “Good advisors are now incorporating tax planning into their routine services. Tax considerations are broad, and include, e.g., tax-loss harvesting strategies, Roth conversions, and even ‘I’m buying a new car what account should I pull from?’”

Jen Swindler, CFP^®, CDFA^®, AFC^®, Owner & Advisor at Money Illustrated elaborates, “When doing consultation calls with prospects, I often tell people that hiring an advisor is not a net-worth-driven decision, but more of a feeling. For example, you may have reached a point where you don’t feel like you can manage their finances fully on your own due to lack of sufficient time, interest, or knowledge; they have an awareness of their gaps in knowledge and feel they’re missing financial opportunities; you feel a sense of financial overwhelm and don’t know where to start. Because so many advisors today offer planning options where an asset minimum isn’t required, it’s become much more approachable to the mass affluent. If you’re experiencing financial overwhelm, searching for an advisor who offers what you need at a price you can afford is much more doable.”

She then lists several lower-cost or free options, “Many people assume that financial advisors are primarily for asset management, but today, many advisors offer behavioral coaching, budgeting, debt management planning, student loan analysis, and advising while you’re building wealth. If you’re in a situation where you’re struggling to pay bills, are taking on debt to make ends meet, and can’t afford a financial advisor’s fees, an AFC®, qualified financial coach, or free counseling center would likely be better options. Looking for an AFC® through a program like AFCPE is a great place to start.”

Stephan Shipe, Ph.D., CFA, CFP^®, CEO, Financial Advisor, Scholar Financial Advising says, “Tax strategy and efficiency are important considerations for wealthy clients. Many wealthy clients require advice on non-financial market assets such as real estate, alternative investments, or closely held businesses. Legacy goals also include the advisor helping prepare family members for inherited wealth.”

Q3. What is the profile of the ideal client for an advisor?

Answers:

Kubanda says, “An ideal client would be responsive and willing to listen to the advice they’re given.”

Omen Quelvog, MQFP^®, Financial Advisor with Clear Insight Wealth Management offers an interesting take on this, saying, “The classic answer to matching an ideal client to an advisor is, ‘It depends.’ That’s the beauty of the financial advising profession. As a client with a need, their ideal advisor is often related to the client’s profession or background. Whether a doctor, military veteran, business owner, farmer, etc., each profession has nuanced benefits an advisor would be expected to know to be deemed competent and trusted. The most advantageous service offered that is difficult to articulate in any marketing campaign, is the intangible benefits of an unemotional third party assessing your overall financial health. With that assessment comes the provision of permission, assurance, and comfort, knowing you have a trusted resource in your corner.”

Lawrence D. Sprung, CFP^®, Founder, Wealth Advisor at Mitlin Financial shares his take, “When starting with a financial advisor the fit should be high on your list. If there’s no fit, there’s no relationship. What I mean by this is that you want to be sure the challenges and goals you are looking to work through with the advisor are things they have experience helping other families work through too. If the advisor has little or no experience in the areas where you want help, that advisor will not be a good fit. Our firm will not move forward with a family unless we feel confident that we can assist them through the opportunities and challenges they face. This allows us to build long-term meaningful relationships with the family and ensure we do not create a situation where we over-promise and under-deliver. We prefer to under-promise and over-deliver.”

David Nash, CFP^®, founder of Tend Wealth says, “The ideal client for a financial advisor is someone who values saving time and achieving peace of mind, particularly as their income and wealth grow. Small mistakes or missed opportunities can have compounding effects, leading to more significant issues down the road. A good advisor is patient and available to explain your options, helping you make more informed decisions about the trade-offs involved in various tax-saving and investment strategies. Even W-2 employees with high earnings can benefit from working with an advisor who applies a tax-sensitive investment approach. Effective tax planning around retirement contributions and withdrawals, spanning both their working and retirement years, can result in significant tax savings over time.”

Matthew R. Pogirski, CFP^®, AAMS^™, founder of Unburdened Financial Planning offers a more spiritual approach, “Our ideal client is someone who knows that peace is not found in possessions or things. Peace is found in knowing and being known. As a Christian, this starts with a relationship with Jesus, but also our relationship with ourselves and others. Our ideal client knows they are not at peace but need help in achieving peace by being known and having a plan that helps them realize who they truly are.”

Q4. Who should not hire an advisor?

Answers:

Pogirski is clear on this, “Someone who is trying to beat the market, buy a hot stock, or pursue quick gain as their goal in life is not a good fit for us as advisors.”

Nash agrees and cautions, “You shouldn’t hire an advisor if you expect them to help you get rich quickly through exclusive investments unavailable to you otherwise. Some advisors may try to promote their ‘proprietary’ approach or sell you complex investment products that often come with higher fees or commissions. It’s easy for advisors to make promises and then take unnecessary risks with your money, hoping for positive outcomes.”

Q5. What should a client expect when starting to work with an advisor?

Kubanda says, “When starting to work with an advisor, you should expect to dive into all matters financial and familial. The more information your advisor has, the better they can guide you and help you reach your goals.”

Pogirski agrees, “A new client should expect their advisor to take time, a lot of time, to get to know them. To understand who they are. This involves asking deep questions about how they feel about money.”

Nash expands, “When starting with a financial advisor, you should expect a series of meetings to review your current financial situation and explore your short-term and long-term financial goals. During this process, the advisor will gather all the necessary information to create a personalized financial roadmap that guides you from where you are to where you want to be. While the initial process might feel intense, once it’s complete, the advisor can alleviate much of the burden, offering you sound financial guidance and a clear path forward.”

Magaña gives his take, “A great advisor sets clear expectations from the jump. Their focus should be helping clients master what’s within their control, like tax efficiency, smart diversification, strategic gifting, and proper asset allocation. A great advisor shouldn’t waste time obsessing over what’s beyond your control, like short-term market wiggles, inflation spikes, or today’s panic-inducing market headlines. That’s why capitalism gave us the Wall Street Journal and the Financial Times.”

The Bottom Line

Not everyone will need a financial advisor.

If your only income is from W2 wages, your tax returns are likely so simple that preparing your returns with the help of tax prep software would be quick, easy, and just as good as what you’d get by paying a CPA much more than the cost of the software.

If your investing philosophy is that low-cost index ETFs are all you need since you don’t believe active investing can beat the market over the long haul, why would you want to pay an investment manager?

However, if your financial situation is complex, if you want to try and beat the market over years and decades (a tall order), or if you have a significant net worth and want to protect that wealth, hiring a financial advisor of one sort or another (or several different professionals) would be very helpful.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.