"When you have an attorney giving you advice, it would be nice to know what their financial relationship is to the advice."
-- Lowell Bergman 

The point in the preceding quote applies not only to lawyers dispensing advice but also to financial professionals. Some financial advisors collect commissions from steering you into various investments, which presents a conflict of interest. That's why "fee-only" advisors can be preferable.

Macro photo of tooth wheel mechanism with FINANCIAL STRATEGY letters imprinted on metal surface

Image source: Getty Images.

Many people wonder whether financial advisors are worth it -- what their average cost is, if the fee is reasonable, whether they should hire investment advisors or financial planners, and so on. Well, if you're thinking "I need a financial advisor," you probably would do well to hire one.

Sure, there are bad ones here and there, either simply unskilled or just not looking out for your best interests. But a good financial advisor can do wonders for your financial life.

Why financial advisors are worthwhile

Some people don't need much financial advice. You, too, might not...

  • If you have been saving for retirement diligently and investing effectively.
  • If you have devised a sound retirement plan that will generate sufficient income in your golden years.
  • If you've got just the right amount of insurance to protect your home, your car, your life, your income, and anything else that needs protecting.
  • If you have your debt under control.
  • If you have an estate plan that minimizes taxes and headaches for your beneficiaries.

Few of us have all those financial ducks (and some others) in a row, though.

According to the 2017 Retirement Confidence Survey, about 24% of workers said they had less than $1,000 saved for retirement, and a whopping 55% had less than $50,000. Only 20% had socked away $250,000 or more.

Having $250,000 put away is certainly far better than having, say, just $50,000 saved. But even $250,000 won't go as far as you might think. Consider, for example, the well-known "4% rule," which suggests that you withdraw about 4% of your nest egg annually in retirement (adjusting for inflation over time). With a nest egg of even $250,000, that would give you just $10,000 for the year. If you're counting on Social Security making up the difference in your retirement income needs, know that the average Social Security income is about $16,000 a year, too.

Man looking at jigsaw pieces on wall, with dollar signs and other success images on them

Image source: Getty Images.

When should you get a financial advisor?

A good financial advisor can look at your big picture -- he or she can assess all your financial needs and challenges and can help you achieve your goals. A financial advisor can guide you through retirement planning, investing strategies, tax issues, dealing with employee stock options, and more. This is valuable throughout your life, but especially when you near major life events, such as paying for college, buying a house, getting married, having a baby, adopting a child, retiring, or inheriting assets.

When changing jobs, you need to consider how to deal with your retirement accounts. All of us should evaluate whether we have adequate disability insurance or need long-term care insurance. Financial advisors can help you determine whether you're better off leasing or buying your next car, whether you should refinance your mortgage, how to avoid estate taxes, how to maximize your ability to care for elderly parents, and so on.

The average cost of financial planners and others

It's hard to offer a meaningful average cost for financial advisors, investment advisors, financial planners, and so on. That's because there are many ways they can charge for their services and a wide range of fees, too. Some might charge you between 1% and 1.5% of your total assets each year, while others might charge several hundred dollars per hour.

This is an area where you don't want to just go with the lowest-cost provider, because even someone who charges you a thousand dollars or more might save you many thousands over the long run, while someone who charges just $200 might save you far less. Focus on finding a good financial advisor, either through recommendations from friends and others, or by interviewing a few candidates. Ones designated as fee-only won't be looking to earn commissions from selling you products, and you can find some via www.napfa.org.

Man raising fists in victory after having climbed steps made of money

Image source: Getty Images.

Just how worthwhile are financial advisors?

Beyond getting your overall finances in shape, a good advisor can also improve your investment performance. A Vanguard study found that by tapping the services of a financial advisor, you might improve your results by as much as three percentage points annually. Here's a look at just how powerful those three points can be -- the following table shows how an annual $8,000 investment can grow over time, at 7% annually and at 10% annually:

$8,000 Invested Annually For:

Growing at 7%

Growing at 10%

10 years

$118,269

$140,249

20 years

$350,951

$504,020

25 years

$541,412

$865,454

30 years

$808,584

$1.4 million

Data source: calculations by author.

That's pretty powerful, no? Even over just a single decade, the difference was almost $22,000 -- and over 30 years, it was close to $600,000! Of course, not everyone who uses a financial advisor will see their returns juiced this much. But even a two-percentage-point bump can make a big difference, and some might enjoy a bump of four points or more.

By the way, Vanguard broke out how they arrived at the three percentage points, finding, for example, that being able to consult an advisor at any time, such as when they were thinking of selling during a market correction, added as much as 1.5% to their returns because the advisor kept them sticking to their plan. On top of that, advisors setting a sensible asset allocation to follow added up to 0.75%. Advisors can also help keep fees low, by guiding clients to low-fee options. That can add another 0.45% to performance.

Shelling out a few hundred dollars or even a few thousand dollars, depending on your needs and assets, for sound financial guidance can be well worth it, saving you far more than the cost. Consider consulting a financial advisor to help you get all your ducks in a row.

The Motley Fool has a disclosure policy.