Do I Need a Financial Advisor?

By Erik H. Nelson on November 17, 2020

Evaluating whether you’d benefit from working with a financial advisor depends on several factors. Unless you work in the financial services industry, it’s unlikely that you have a deep understanding of all that goes into developing a comprehensive financial strategy. Financial advisors do much more than just manage your investment portfolio – even though that’s an important role on its own.

Keep reading to learn the benefits that come with using a financial advisor, from allocating your investment assets based on your specific timeline to understanding strategies to enhance the after-tax value of your estate.

How Financial Advisors Stand Out

As you accumulate wealth, it becomes more challenging to manage your finances and maximize your after-tax assets holistically. It can be easy to miss opportunities or miscalculate the best tactics to reach individual goals.

A financial advisor evaluates your current financial situation while also planning for your future goals. Helping to prioritize and create realistic timelines and determine the most suitable asset allocation and investment vehicles, your financial advisor can help develop a roadmap of how to achieve your various financial goals. If you are wondering “what is financial planning?” you can read about this specific topic in depth on our blog.

You also get the benefit of working with a professional who can take an objective approach to your personal finances. A qualified advisor understands your personal goals and helps to alleviate the understandable emotion that comes from the decision-making process. An experienced advisor also sticks with you over the long-term to help navigate through times of economic uncertainty to help better preserve your wealth.

Benefits of Working with a Financial Advisor

If you’re wondering, “Do I need a financial advisor?” here are some distinct benefits from which you can benefit:

Customized Strategy

Using a financial advisor can help ensure your money is truly working for you. There’s simply no one-size-fits-all solution to financial planning, and this is especially true as your financial situation becomes more complex with higher earnings, increased taxes, sudden wealth, or executive compensation.

Your initial meeting with a new financial advisor covers not only the monetary aspect of your life, but also your goals and your concerns. Here are some of the most common topics your advisor will discuss to design a plan:

Retirement planning:  Get personalized advice on investments, Social Security, Medicare, IRA required minimum distributions, and other aspects critical to your retirement goals. At Dowling & Yahnke Wealth Advisors, our team crafts a custom roadmap based on these factors and your goals.

Estate planning:  In addition to planning for your own retirement, a personal financial advisor helps you strategize regarding your legacy goals by facilitating an estate plan. They’ll work in partnership with your estate planning attorney to help you navigate the intricacies of estate taxes so you can make the impact that you intend on the lives of your loved ones.

College savings:  A financial advisor can also help with education planning based on your family’s unique circumstances. No matter the age of your kids or grandkids, your advisor can help you select the best type of account for your future educational needs while evaluating how much you need to save to fund those future expenses.

Evidence-based Investing

Managing your investments and the emotion that comes along with them is one of the most important jobs of a personal financial advisor. But it’s critical to find one who doesn’t over-promise results or push investments based on their commissions. At Dowling & Yahnke Wealth Advisors, our team doesn’t try to time the market. Instead, we use an evidence-based approach that is focused on managing risk and investing for the long term. Your individual investment strategy is based on the following principles related to your specific situation:

  • Appropriate diversification
  • Balanced risks and returns
  • Thoughtful asset allocation
  • Practical rebalancing

Additionally, your advisor should always have your best interest at heart. Dowling & Yahnke Wealth Advisors do not work on commission. Instead of pushing products that may not be ideal for you, we charge a fee based on your assets under our wealth management. That way, you can rest easy that we have no incentive to recommend a certain investment strategy other than the one that makes the most sense for you.

Professional Experience and Education

You have many passions in life, and one may not be spending hours studying for financial certifications. That’s where working with a financial planner who pursues the further professional education may be worth the investment. There are a couple of different types of certifications you’re likely to see when looking for an advisor. Here’s a quick overview of each one so you know what to expect.

CERTIFIED FINANCIAL PLANNERTM (CFP®):  In order to obtain this designation, financial planners must complete college-level financial planning coursework and pass an exam covering some of the following topics:

  • Insurance planning and risk management
  • Retirement planning (including Employee benefits) and Income Planning
  • Tax planning
  • Estate planning
  • Investment planning
  • Education planning
  • Professional conduct and regulation
  • Principles of financial planning

A CERTIFIED FINANCIAL PLANNER™ must also obtain between 4,000 and 6,000 hours of professional experience in the field while pledging to adhere to a strict standard of ethics. Continuing education is also required.

Every Lead Advisor at Dowling & Yahnke Wealth Advisors is encouraged to obtain the CFP® designation.

Chartered Financial Analyst (CFA):  Widely considered the hardest designation in finance, the CFA is a rigorous three-year program focused on investments.  The following topics are tested in a series of three exams:

  • Economics
  • Ethics
  • Equities
  • Fixed income
  • Derivatives and alternative investments
  • Quantitative methods
  • Financial reporting and analysis
  • Corporate finance
  • Portfolio management

At Dowling & Yahnke Wealth Advisors, we are proud to say that as of September 2020 we have 11 CFA Charterholders and 20 CFP® professionals.

Certified Public Accountant (CPA):  Each state has its own board of accountancy that sets the requirements for CPAs. There’s also a national exam that must be passed in order to earn this designation. CPAs must prove their knowledge in the following areas:

  • Auditing and attestation
  • Financial accounting and reporting
  • Regulation
  • Business environment and concepts

Other certifications you may see behind a financial advisor’s name include:

  • Chartered Divorce Financial Analyst (CDFA)
  • Certified Exit Planning Advisor (CEPA)
  • Certified Private Wealth Advisor® (CPWA)
  • Investment Advisor Certified Compliance Professional (IACCP)
  • Master Planning Advanced Studies (MPAS)
  • Accredited Investment Fiduciary Analyst (AIFA)
  • Chartered Financial Consultant (CHFC)
  • Chartered Advisor in Philanthropy® (CAP)
  • Chartered Life Underwriter (CLU)

Minimizing Taxes

Financial planning and taxes go hand in hand. It’s important to have an advisor that stays up to date on strategies to minimize your taxes on investments. Your financial advisor may recommend that you allocate your investment holdings across tax-deferred and taxable accounts. There may be more tax efficient investments that make more sense in a taxable account, like a Brokerage Account, while others may be better off in a tax-deferred account, like an IRA or 401(k).

Tax loss harvesting is another tactic that financial advisors use to minimize capital gains tax while maintaining a balanced portfolio. For instance, your advisor may sell a security at a loss, that can be used to offset a portion of taxable income, then buy a comparable alternative. There are technicalities from the IRS that must be followed with this strategy which can be executed properly by an experienced professional.

Finally, your financial advisor can help you strategize your charitable intentions in a tax-efficient manner, making your donated dollars go further. There are a number of ways to do this, including gifting appreciated stock, creating a donor-advised fund, and making qualified charitable distributions from an IRA. Investing in a personal financial advisor can ultimately help to make your donations better your financial situation, in addition to making a difference in the world.

Collaboration with Other Financial Professionals

Because your needs become increasingly complex as you grow your wealth, you should have a solid team in place to support a broad range of needs. Whether it’s an ongoing relationship with a tax advisor or a one-time event with a divorce lawyer, your financial advisor should partner with these types of professionals to integrate your finances in a holistic manner.

With a seasoned financial advisor, you’re more likely to get quality recommendations when you need them and have someone in your corner that can navigate multiple relationships, as needed. Your advisor often serves as the central hub for these collaborative partnerships and can share information, as appropriate.

Do You Need a Financial Advisor?

Hiring a financial advisor may not be right for everyone, especially if you’re just starting to accumulate wealth. But as you do, it’s important to know that you’re managing your assets in the most productive way possible, including being considerate of taxes.

Estate planning and charitable giving can be a lot more impactful when working with a financial advisor. You can better plan for short-term goals, like saving up for a home (or second home), planning a major life event, or navigating a complex salary offer. Whether you don’t know where to start or face indecision, a financial advisor can offer in-depth insights and expertise that you can count on, while partnering with other professionals, so that all bases are covered. Plus, when they’re a fiduciary who puts your interests first, you know you’re getting sound, unbiased advice. If you are wondering to yourself, “What is a fiduciary financial advisor?” you can find out more by reading our blog.

Bottom Line

Using a financial advisor can help to ensure that you’re growing and preserving your wealth effectively and efficiently. An advisor can help guide you through periods of economic growth and calmly steer you in the right direction when uncertainty strikes. No matter what your goals may be, a financial advisor helps to create a financial roadmap to get you there.

Contact Dowling & Yahnke Wealth Advisors to find out how our team of experienced San Diego financial advisors can help you.


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