When to Hire a Financial Advisor (and When to Invest on Your Own)
If you have a well-balanced, diversified portfolio, it’s likely built to withstand the ups and downs of the market. In other words, for most casual investors, your portfolio was designed to not require the (potentially costly) help of a practice advisor. So how do you know if you are in a situation that requires professional help? Here’s how to decide what’s right for you and find quality help when you need it.
Arguments in favor of independent investing
Do-it-yourself investing offers several benefits:
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Lower costs : Most financial advisors charge a fee based on how much money they manage for you, and this fee can range from 0.25% to 1% per year. With a $500,000 portfolio, this could cost you around $1,250 to $5,000 per year. Over decades, these fees can reduce your profits by hundreds of thousands of dollars (thank you very much, compound interest) .
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Simpler options : For most investors, managing their own investments through low-cost index funds is a sufficient approach. A core portfolio of three funds using low-cost index funds (U.S. total stock market, international stocks and bonds) provides broad diversification and historically high returns. This strategy requires minimal time and experience to implement. If you take this approach, you probably don’t need to pay a consultant to keep track of it.
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Sense of control : Managing your own investments means maintaining complete transparency and control over your money. You can immediately adjust your strategy as circumstances change without the need for an intermediary, which can be very attractive. However, let’s look at why this might sound better than it usually is.
When professional help makes sense
Contact a financial advisor if you:
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Have complex financial needs : estate planning, optimizing the taxation of multiple accounts, or managing inherited assets require professional expertise. If you’re a business owner or truly wealthy, chances are you can afford—and will benefit from—comprehensive wealth management.
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Lack of time or interest . Be honest with yourself. If researching investments and rebalancing portfolios seems tedious, an advisor can handle these tasks. The expense may be worth it if it prevents analysis paralysis or emotional trading decisions.
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Emotional discipline is needed . Honestly, you are never as objective as you think you are. When I spoke with Matthew Chancey , CFP, about what it takes to become an active investor , he explained that you need to “have a higher risk appetite and be more emotionally resilient than every investor sentiment study has ever suggested.” that passive investors can be passive.” ” Some investors panic-sell stocks during market downturns or chase yield. That’s where a good advisor comes in: He can provide behavioral coaching and prevent costly mistakes during volatile periods.
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Be prepared for major life changes . In addition to emotional discipline, major life changes come with many financial challenges. During a divorce, inheritance, retirement, or career change, professional guidance can help navigate complex financial decisions and tax implications. Here are some more financial milestones that are worth a professional’s time and money.
How to find quality financial aid
If you decide to hire help, here’s how you can get started.
Fee-Only Fiduciary Advisors
First of all: Be sure to pay close attention to the difference between fee-based advisors and fee-only advisors , as some financial advisors may not have your best interests at heart. After all, when it comes to finding the right financial planner, the last thing you want is to get scammed . Look for consultants who:
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Charge transparent fees (not commissions)
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Have a fiduciary duty to put your interests first
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Have respected credentials (CFP, CFA)
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Provide comprehensive financial planning, not just investment management.
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We are ready to explain in detail our approach and cost
Robo-advisors
For automated investing with minimal fees , a robo-advisor may be all you need . They can be a great choice for new, younger investors. But more detailed planning and strategy development may still require human input and advice you can trust.
Digital platforms like Vanguard Personal Advisor Services or Betterment offer a middle ground:
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Lower fees (0.20-0.30% per year)
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Automated investment management
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Basic financial planning tools
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Access to human consultants
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Suitable for simple situations requiring minimal setup.
Bottom line
Most investors will be better off if they learn the basic principles of investing and manage a simple portfolio on their own. The money you save on fees can add up significantly over time.
However, if you have complex needs or know that you will not be able to maintain discipline without help, it may be advisable to seek help from a qualified counsellor. Choose carefully, review all fees, and regularly evaluate whether you’re getting enough bang for your buck. More information about the advisor selection process can be found in our guide here .
Remember: Even with an advisor, you should understand your investment strategy and feel comfortable asking questions. The best consultants educate their clients, not create dependency.