10 Reasons Why You Don’t Need A Financial Advisor for Asset Management (Updated May 2023)
Topics: Fiduciary, Savings Rate, Financial Planning, Risk/Reward
Wait, what? After months of telling anyone who would listen that they need to use a professional to help them manage their money, am I capitulating? Have I gone crazy? Not exactly. A little stir crazy perhaps. And before clients start heading for the exits, I assume that after you read this list, you will feel even better about your decision to use my services! And for those that have made it this far without professional help, perhaps you fit into some of the items on the list, or maybe you will come to the same conclusion my clients have (wink, wink!).
So, I absolutely think you need a professional to help with Personal Finance. In my last post, I was going on and on about Retirement Plans for Independent Contractors and how I tend to gravitate toward Gen X and Gen Y as clients since that’s where my own experiences are. Just before that I also wrote that $1 million isn’t enough to retire based on how much most of those within Gen X and Gen Y spend today (or hope to spend post-retirement). Plus, I believe it’s worth paying an Advisor given the potential savings from the Taxes and Fees alone, that you unknowingly pay because literally no one else is monitoring that for you or going to care about your finances as much as (or more than!) you do.
But perhaps you have developed some skills over the years or have a lot of spare time for your finances or some other resources are available to you. So, if you meet these 10 criteria, you probably don’t need a Financial Advisor:
- Your net worth is entirely within your 401K and your plan/HR Rep is awesome
- Your CPA is awesome and provides financial advice
- You get free advice (from a Fiduciary hopefully)
- You have an extremely high savings rate
- You spend several hours per week planning for your current Personal Finances
- You love to read and learn about Personal Finance
- You can make big financial decisions without emotion
- You understand risk in terms of financial markets
- You understand portfolio management vs stock picking
- You don’t want to be told what to do with your money and/or don’t have any money
Before we get into the details:
- Our Personal Services are designed to help you establish goals and understand the probability of achieving those goals. We can manage the multiple household accounts within your portfolio to work toward those goals.
- If you’re curious about your net worth, ready to start your Financial Plan or outsource your Household CFO duties, start here by creating your own Right Capital login.
- If you’re focused on cost cutting and budgeting, check out our Cash Flow Management service and this post: How Do I Get Out of Credit Card Debt and Start a Budget? You can also sign up for Free expense tracking.
- If you have other needs or questions about your finances, please email me: email@example.com.
Onto our list of 10 Reasons:
1. Your net worth is entirely within your 401K and your plan/HR Rep is awesome
Maybe you have an extremely low-cost Retirement Plan and an HR coordinator that used to work for Warren Buffet (probably the most famous investor of all time) and can offer worthwhile advice. Or if you work for a bigger company with assets at a large custodian, they might have “advisors” call and check in from time to time. Now these would at least be licensed professionals, but if it were me, I would struggle to believe they care about my finances as much as I do or someone with whom I have a personal connection. Plus are they going to tell you how much the underlying costs are for their own products they are selling you? Doubt it. However, if your Plan has the least expensive investment options available and someone related to your Plan is helping you narrow down your investment choices and providing proper asset allocation (across your entire household portfolio) based on your appetite for risk, time horizon, investment objectives and experience, and then also preparing you for retirement by illustrating the intricacies of taking distributions, maximizing your social security and taxes, then you may not need any more help than that. What if you have two 401Ks? Or IRAs? Or other accounts?
2. Your CPA is awesome and provides financial advice
My CPA is awesome but I don’t look to him for financial advice. In fact, I pose tax-related questions to him for myself personally and my business (and my clients). I don’t expect him to ask me every possible question to improve my tax situation. So, if you’re not reading about tax strategy and keeping up with changes, your CPA may not necessarily ask questions to help you optimize your tax planning, which is a year-round event. A good financial advisor can illustrate the benefits of effective tax planning over a lifetime.
3. You get free advice (from a Fiduciary hopefully)
Maybe you have a relative that’s “in the business” and willing to offer you free advice. Hopefully, they would be licensed and therefore responsible for the advice they provide. And hopefully they would be working in a Fiduciary capacity even if they don’t get paid. As I’ve noted, I have a Fiduciary duty to my clients, meaning I work in their best interests, even if detrimental to my own.
4. You have an extremely high savings rate
In previous writings on achieving Financial Independence, I talk about savings rate. The 50/30/20 rule from my blog on budgeting proposes a 20% savings rate, which would be outstanding. However, those seeking Financial Independence often have a dramatically higher rate, and I propose a 50% savings rate! OMG! Needless to say, if you are saving at a higher rate, you have more room for error in your Plan, so perhaps a massive savings rate would partially offset the need for Financial Advisory services.
5. You spend several hours per week planning for your current Personal Finances
In my very first post which basically had the opposite title as this post, I discuss spending as much time on your fiscal health as your physical, spiritual or mental health. While I would argue that looking at your finances every day (how much did you win/lose in the market today?) is not a good use of time, having a plan is a good idea. I review my expenses and pay any manual bills at the end of every week. At that time, I plan my trades (sometimes more frequently) and assess my business accounts and rental property accounts to make sure nothing falls behind. I evaluate all holdings to make sure I’m not missing a better option or important news that will impact my portfolio long-term. At the end of every month I check my budget, making notes of variances, and at the end of every quarter, I update my personal balance sheet. Annually, (or sometimes every 6 months), I reassess my 5-year plan and goals and adjust my budget and longer-term expectations accordingly. This averages to probably 4-5 hours per week, so if you are going through a similar process, you might not need professional help.
6. You love to read and learn about Personal Finance
My goal is to read a book a month. Some years I accomplish this goal but often I’m lagging. Still, my favorites are about finance, investing, real estate, planning, strategy, habits and stories about people with different ideas of success. If you read books by famous investors in an effort to implement their strategies, or if you are up to date on tax code changes (or at least know what questions to ask), savings rates, and other financial items, and have a passion for the topic, you may not need a Financial Advisor.
7. You can make big financial decisions without emotion
We all make emotional decisions, but have you sold a stock as it tanked, only to watch it rebound the next day? Or rushed in to buy the latest new fad (maybe Bitcoin?) only to see it fall apart. A big part of the reason many people employ a Financial Advisor is to avoid emotional decision-making in investing. If you invest according to a Financial Plan, your decisions are driven by a plan for the long-term vs a short-term emotional reaction.
8. You understand risk in terms of financial markets
Perhaps you remember some terminology from a finance class (or you have an advanced degree in statistics), where the instructor talked about standard deviation and correlation. These are statistical tools used in finance to help create a portfolio that maximizes your expected return based on the risk you are taking. If you have evaluated your own portfolio against these measures, then it’s possible you don’t need assistance from an Advisor.
9. You understand portfolio management vs stock picking
This certainly ties in with the previous point about constructing an appropriate portfolio. Many investors occasionally make a great stock pick, but to do so consistently is improbable and a strategy that is unlikely to outpace the market over the long-term. Even though you may have some “big wins”, the idea is to manage your household portfolio for several decades vs successfully time the market repeatedly.
10. You don’t want to be told what to do with your money and/or don’t have any money
It’s natural to not want to talk about money. It’s natural to not want to be told what to do (ask my kids). It’s certainly natural that you may not want to be told what to do with your money. I believe the role of an Advisor is to educate, then the choice is up to the investor. Additionally, if you don’t have much money to invest, paying someone to manage it probably isn’t necessary, which is the reason I institute an asset minimum for my Asset Management services. Still, I believe investors can benefit from a Financial Plan, which does not require an asset minimum.
So in closing, you may not need to pay for financial advice if you can commit the time and resources to fully understanding your Personal Finance picture for the long-term, have access to and knowledge of inexpensive investment options, have a passion for Personal Finance and feel confident in balancing the return and risk in your portfolio without emotion. However, I believe most people don’t feel that way, nor should they. I think most investors should certainly outsource their finances to a professional. I look forward to hearing from you!
Please check out more popular/related blog posts:
As well as other more recent posts:
$1 Million Is Not Enough: How Much Do I Need to Save for Retirement?
If you or someone you know has any financial-related questions, I would love to have a conversation, so please feel free to reach out: firstname.lastname@example.org.
And stay tuned for additional blog posts on retirement savings and other topics.
Best wishes on your financial path!
This post was created by Matt Beeby, the Founder of MHB Advisory Services. Matt has been working in Financial Services and investing in real estate since 2005, though his investment experience spans nearly two decades. He is a Christ follower, active in both his church and his neighborhood association. Matt enjoys sports and family time. Read more about Matt on his website bio.
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- This information is believed to be accurate and should not be considered tax or legal advice.
- Please consult tax or legal professionals for such advice and be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed.
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