Is a Financial Advisor Needed?

Can I Do It Myself?

As we grow and learn, there are many tasks we can do on our own. I no longer need someone to tie my shoes, as my mom taught me this skill. Using YouTube I can often call an expert into my home office to give me not only step-by-step instructions for how to replace a garage door opener, but also the cautions, the tools needed to do the job, and the most important considerations before I purchase the opener. Most of life works this way. We spend time learning so that we are prepared for many things in life.

There are certainly things I would not attempt to do on my own, even after watching a YouTube video. For example, I would not attempt any task that would require walking on our roof (my wife would disapprove of that for a person of my age) or flying an airplane using a “Flying for Dummies” book. Having said that, I think far too many people think investing is like walking on a roof or flying a Boeing 747 passenger jet. It isn’t or at least it doesn’t have to be.

Barron’s Thinks Advisors Improve Your Potential for Success

I read a February 16, 2024, article, “Do Financial Advisors Really Improve Retirement Readiness? These Surveys Say ‘Yes.’” What I read helped me understand why the “surveys” lean towards “yes.” The article’s author, Kenneth Corbin, starts by saying, “A big reason people hire financial advisors is to help prepare them for the reality of life in retirement. But do they actually help? Two new surveys suggest they do.” The temptation may be to rush to find one.

The American College of Financial Services conducted a study of retirement-income literacy with a pool of around 3,700 older Americans. The results of the survey suggest there is a “compelling link between retirement literacy and working directly with a financial advisor.”- Barron’s

In addition, the article states that “with an overall score of 31 out of 100, Americans are heading into retirement without a sound knowledge of important issues like Medicare, Social Security, annuities, and long-term care.” In each portion of the article, the lack of knowledge or literacy was shown to be a hinderance to success in retirement.

What One Reader Said About the Article

“Of course the American College of Financial Services says you need a financial advisor. Just like the National Association of Realtors says now is the time to buy a home, and your local Ford dealer says now is the time to buy a truck.” He went on to say, “Stocks and bonds go up and down, but the money you lose to financial advisor fees, commissions, trading costs and taxes is gone forever.” – John Greaney

So YOU Need an Advisor?

The author of the Old Testament book of Proverbs has something to say about this. Here are just a few samples: “Let the wise hear and increase in learning, and the one who understands obtain guidance.” Proverbs 1:5 “The way of a fool is right in his own eyes, but a wise man listens to advice.” Proverbs 12:15 “By insolence comes nothing but strife, but with those who take advice is wisdom.” Proverbs 13:10 “Listen to advice and accept instruction, that you may gain wisdom in the future.” Proverbs 19:20 “Where there is no guidance, a people falls, but in an abundance of counselors there is safety.” Proverbs 11:14

Perhaps the most important question is “Do I need to pay for an advisor every year, year-after-year? It is similar to asking, “Do I want my mom to tie my shoes my entire life, or do I want to learn from her the best way to do it and then do it myself for the rest of my life?”

Advice is valuable, but a good advisor should not only offer advice, but an education. When that happens, if the advisor is doing their job, you probably won’t need to pay them for the rest of your life. Think about John Greaney’s comment: “the money you lose to financial advisor fees, commissions, trading costs and taxes is gone forever.”

Three Suggestions

Suggestion one is to learn more about your current financial situation and investments. One of the reasons I write my blog is to tell you what I have learned from my years of investing. I don’t dislike advice. I have had a couple of advisors during my fifty-plus years of handling our financial assets. Some were good and contributed to our success. Some, quite frankly, were terrible. They charged me a lot, and they did not return value for what they charged to do what they did.

I also have been fortunate to help others. Sadly, I have seen many advisors who charge far too much and who deliver little value. Although I did not keep records about each encounter, I think only about one in five advisors were offering ongoing value. Is your advisor teaching you how to tie your own investing shoes, or are they confusing you and making you dependent on them for your entire life? If it is the latter, then perhaps you are paying too much for too long.

Suggestion two is to read a good book about investing. John Bogle’s “The Little Book of Common Sense Investing” is a good place to start. At the very least, it will give you the questions you will need to ask when you meet with an advisor.

Suggestion three is to create a plan to become independent of your advisor. This means you will have to learn more than you can get from Bogle’s book. One good source for helpful information is Investopedia. Their mission statement says it all: “Our Mission: Millions of readers come to us from all over the world and from all walks of life. Some are learning about money for the first time, while others are experienced investors, financial advisors, and professionals looking to improve their financial know-how. No matter who they are, we are here to help simplify financial decisions and information.” Source: Investopedia

One Final Question

Do you really know what your current advisor is charging for their services? I suspect not. Rarely have I helped someone who was not aghast when they learned the annual cost of their advisor. It is better to be informed than to be financially injured by high costs.

All scripture passages are from the English Standard Version except as otherwise noted.