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You Don’t Need a Financial Advisor

Written by Neal Frankle - 9 Comments

With all the uncertainty in the economy, you might be asking yourself if you need a financial advisor.

I’m a financial advisor so I make my living when people ask this question and decide that they do. But even so, I can tell you that not everyone needs an advisor.

Here are some ideas to help you decide if you really need one if you’re thinking about it:

1. Do you expect a “religious experience”?

I’m talking about miracles of course.

Sure your investments have been hammered. So has everyone else’s.

Don’t expect an (honest) advisor to make a killing in this market. There aren’t many people who are knocking the ball out of the park these days – professional or otherwise.

But when it comes to investment performance, it’s tricky.

If you consistently do much worse than the market, that’s a sure sign that you need help.

If you are unhappy with your performance but it is inline with the market, don’t expect miracles. You might benefit by working with an advisor if you are amenable to changing your asset allocation. That change could result in you getting returns that are more in line with your risk appetite.

But if you aren’t willing to accept lower returns in exchange for less risk, don’t waste your time or money. Financial advisors are only human, they’re not miracle workers.

2. Buying life insurance

You don’t need a financial advisor if you know you need life insurance. Just figure out how much you need and buy the best term life insurance cheap. Done.

Now, if you have people who depend on you and you think you don’t need life insurance, or you refuse to find out how much life insurance you really need, then you need to see an advisor. What you need in this case is an overall plan and to see how life insurance fits in with that plan.

3. Creating a living trust

If you need a living trust, don’t go to an advisor. Go see an attorney to set up your living trust.

Like life insurance, if you don’t know if you need a living trust, you should see an advisor you trust rather than attorney. This way, you’ll get objective advice. Of course, the end result will be the same in most cases (you need a living trust) but you’ll feel better if you are told this by someone who has nothing to gain by telling you so.

4. Creating budget

An advisor can help you set up a budget. They can help you get the proper software and help you start using it. If your budget is your main concern, you should probably meet with a qualified advisor for a few hours, but that’s all you’ll need.

But you have to be honest with yourself. If you aren’t willing to do the work, don’t waste your time with an advisor. A budget isn’t a hard thing to implement. Once you set it up properly, it will take you a few hours a week to keep up-to-date.

People who fail to keep their budgets up to date do so mainly because they don’t want to see the truth. They prefer to stick their heads in the sand. Limited time isn’t a good excuse because it doesn’t take all that much time.

So see an advisor if you need help setting up your budget and are committed to doing the work.

5. Formulating a retirement plan

Having a retirement plan can make all the difference in achieving your goals and having financial peace of mind.

You don’t need a financial advisor to create a plan. There are plenty of programs online that allow you to do this for yourself.

However, a seasoned professional can add a ton of value in this regard. He or she can point out areas, issues and concerns you may not have anticipated. He or she may have helped hundreds of people create and implement a retirement plan. You may have never done it before. Once you have a plan, you’ll be better able to make the best investments for your retirement.

If you do want an advisor to create a plan for you, it should take her no more than 3 or 4 hours unless your situation is very complicated.

But if you’re not going to implement the tactics suggested by the plan, again, don’t bother.

6. Dealing with credit and debt problems

I get asked to help people solve their credit and debt problems all the time. So do lots of other financial planners. But that’s not our specialty. Financial advisors can help generally but if you are looking for ways to improve your credit score or solve your debt problems, there are better resources. You can do plenty of this by yourself but if you do decide to hire someone, make sure you avoid debt relief scams.

Are you seeing the pattern?

If you are truly open to doing things differently, you can really benefit by using a financial advisor. If you are unwilling to take advice, don’t kid yourself and don’t waste your money.

Do you use an advisor? Why or why not?

Published on September 16th, 2010
Modified on October 4th, 2011 - 9 Comments
Filed under: Planning

About the author: is a Certified Financial Planner in Los Angeles whose goal is to help people improve their finances and find balance in life. He covers these topics at his personal blog Wealth Pilgrim.

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9 Responses to “You Don’t Need a Financial Advisor”

  1. 1
    No Longer Conflicted Says:

    Good post. Also being an financial advisor I frequently find that many people, who are quite competent in many things, are so overwhelmed by financial matters that they just throw in the towel and seek professional advice. Many times, the best service I can provide them is to show them how they can do much of this for themselves – like you have done with your post. As with many things that are either new to you or involve a substantial undertaking, there is a need to take an approach akin to eating an elephant – one bite at a time.

  2. 2
    DIY Investor Says:

    Good info. People need to listen during the initial interview. Good advisors will explain what they can and cannot do. Many times people don’t pay attention and inflated expectations are not met, at possibly a great cost.

  3. 3
    Nick Says:

    Great post. I don’t think very many people “need” a financial advisor, but some folks just won’t do it themselves. So if you’re not the type to do it yourself, finding the right help is a decent second-best alternative. It’s certainly better than not having a financial plan at all.

    I’m a big DIY guy though.

    Great stuff.

  4. 4
    Rosa Says:

    We keep thinking we’re going to go talk to a financial advisor as a kind of mediator for our points of disagreement.

    But, we have an awful lot of friends and family who work in financial services industries, and talking to them and people they recommend has not been at all encouraging. Nobody I know who is serious about their finances uses an advisor or broker. So I can only get recommendations from people who are clearly taking bad advice and buying high-load funds, single pick stocks, or non-tax-advantaged managed accounts instead of simple tax-advantaged ones…and I won’t take their recommendations.

  5. 5
    Olivia Says:

    We finally used an advisor to see if we missed anything. We’ve been budgeting and saving for years but we knew it would never be enough to retire on. He layed out our options, even explaining the pros and cons of products he got no commission on. It was very helpful, especially as our situation is somewhat unconventional. He reviewed liquidity, “multi use” products like whole life insurance (borrow against, drawn down from), health insurance options, traditional retirement vehicles, etc. I can’t exactly say we would have figured some of these things out ourselves, since we weren’t looking in those particular places. So I think he was well worth the time spent.

  6. 6
    Jeremy Says:

    I think for the “basic” things you are right in saying people can get the information they need through this website or any of the other financial websites to find the “right” thing to do. However, I think part of the reason I want to go see a financial advisor is to confirm the right path I have taken. There are too many solutions out there to research but none that hit on exactly my problem.

    Is it a personal confidence issue? Yes it is but I dont plan to see an advisor more than twice at most in my lifetime. I am just going to use it as confirmation I am doing the right thing for myself and my family.

  7. 7
    Rob Ward Says:

    I couldn’t agree more. Most things that people assume you need a professional for can be done on their own. So many people think that financial matters are over their heads. But the truth is, all of the information is freely available to them. It is just a matter of taking advantage of it.

    I used an advisor when we first got married to determine how much insurance we should get. Now that we’ve got it we’re good to go (for another 15 years anyway).

  8. 8
    Ryan Says:

    Well, based on the 401k’s and 403b’s I see on a daily basis from “do it yourself-ers,” I’d argue that a financial planner adds tremendous value.

    The reality is that most people have no clue how to invest on their own. 55-year olds with 80% emerging market exposure. 30-year old kids in 95% long-term government bonds. And if I had a nickel for every time I’ve heard one of these:

    “I picked the one that went up the most in the past.”

    “The name sounded good.”

    “My neighbor likes that investment.”

    “I just put 10% in each and figured it would be good.”

    To many in our society, money is the #1 object above all else. So why the heck would you want to do it yourself when you call professionals for everything else?

  9. 9
    Chris Carroll Says:

    Highly agree, many people think they need an advisor when they don’t. While I take and give advice when appropriate, I’ve never paid an advisor my hard earned dollars to seek their advice. I figure if I want to put my money to work, knowing what it’s doing and how to reach my goals, it’s in my best interest to learn what investments are out there and know what my money is getting into.
    Now for the flipside, there are people that are looking for the quick buck and will always believe an advisor will get that for them. If not, they move to the next advisor and so on……

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