Tim Moore
March 23, 2021

That’s a question I hear from time to time. And you would be right to ask the question. Don’t just hire an advisor because someone told you that’s what your supposed to do, or because you want to be completely uninvolved with your finances.

The reasons you SHOULD consider hiring a financial professional to assist you in the planning and management of your retirement or other investing portfolio are manifold. But I want to begin by encouraging you to do your homework, and understand WHY you may need a professional involved in the first place. Everyone has different motivations when it comes to this subject, and some people enjoy the challenge of picking their own stock & bond portfolios. But there are many factors in play when it comes to managing an investment portfolio, and you need to be aware of them.

The case AGAINST hiring a financial advisor

  1. You don’t trust anyone else with your money. Some people find themselves in this camp, and it’s certainly not an unnatural feeling. The reality is, nobody will ever be more concerned with your financial well-being than you. That is, if you are actually paying attention ūüôā The reality is, there have been many people in this industry who have taken advantage of good hard-working folks and charged them hidden fees and high commissions for their services. Or they have made financial decisions that was in the best interest of the advisor and not the client. That’s why it’s important you hire an advisor who is up front with their fees and is working as a fiduciary on your behalf.
  2. You are a DIY’er and you also enjoy spending a decent amount of time researching the market.¬†Certainly not a lot of individuals are in this camp, but there are some. You enjoy learning new things, are comfortable with numbers, and have a knack for making prudent investment decisions. The key thing to remember and consider is this: What is your time worth? Do you tend to make the best financial decisions under pressure? Are you the type of person that can apply a systematic approach to your investing and not be easily swayed emotionally based on what the headlines say? Remember March 2020? 2008? Sometimes just because we can do something, we often would be more productive hiring a qualified person to do it while we focus on optimizing the things only we can do well. I can open up the hood and learn how to do some basic work on my car. And I did just that for a number of years, until our vehicles and my time started becoming more valuable. Now I would rather pay a trusted mechanic $500 to do something in a day that would cost me $200 in parts and an entire weekend learning how to do. My time is better spent building my business and being with my family.
  3. You don’t ever plan to invest for your future.¬†If that’s you, my sympathies, and you can go ahead and stop reading this article now.

Sometimes just because we can do something, we often would be more productive hiring a qualified person to do it while we focus on optimizing the things only we can do well.

The case FOR hiring a financial advisor

  1. You DO value your time.¬†If you’ve gotten to the place where you need or want to spend the majority of the time on things you are already good at, hiring an investment advisor makes a lot of sense. You don’t want to be bothered trying to follow the financial news cycle, paying attention to the fluctuations in interest rates or the FED’s monetary policy changes. You don’t want the pressure of trying to decide the right stock, ETF, mutual fund, or investment-grade bond to get in, and the idea of routinely buying and selling inside of your investment accounts to achieve rebalancing targets doesn’t sound like your cup of tea. An advisor can save you all of that headache, and can and should provide you with regular updates on your accounts and how they are staying on target with your goals.
  2. You understand that behavior and emotions play at least a 50% role in personal investing. There have been extensive studies done on the concept of behavioral finance, and how individual investors are prone to do the absolute worst thing at the most inopportune time. What do you do when your portfolio is down 30% in 3 weeks like in March of 2020? Studies show the average person going it alone sells out of fear, and ends up locking in a massive loss that could have made a wonderful long term win had they understood the plan. Working with an advisor gives you a competent professional in your corner to help save you from yourself at times. Much like a great coach can be the key to keeping their team focused, an outstanding advisor knows how to keep their clients focused on the goal and not short-change themselves out of greed or fear.
  3. You like to get higher returns.¬†Study after study shows that working with a professional investment advisor gives you higher returns than if you do it yourself, unassisted. This is not because the advisor has some magical formula or secret sauce to getting returns that are out of reach for the average investor. It’s because of the behavioral finance component mentioned as well as the fact that that’s what you hired that person do to. They are doing the research, staying up on the market, and making prudent decisions about your investments while you are at work or at play. In 2001, Dalbar, a financial-services research firm, released a study entitled “Quantitative Analysis of Investor Behavior,” which concluded that average self-directed investors consistently fail to achieve returns that beat or even match the broader market indices. The study found that in the 17-year period to December 2000, the S&P 500 returned an average of 16.29% per year, while the typical equity investor achieved only 5.32% for the same period‚ÄĒa startling 9% difference! It also found that during the same period, the average fixed-income investor earned only a 6.08% return per year, while the long-term Government Bond Index reaped 11.83%.*
  4. You have goals and a plan to save for your future.¬†A good advisor is your partner in the process and wants to see you hit those goals. That’s how they make money, and should be the only way they make their money, helping you succeed. That’s why it’s important to hire someone who is acting as a fiduciary on your behalf, and is teaching you about why you are invested in the things you are. Not a Wolf of Wall Street, get rich quick, just trust me and hand me your money, dummy, type-of-guy.

*From an Investopedia.com article entitled The Truth About Investor Behavior”

Hopefully I’ve stirred your curiosity and opened your mind to considering working with someone. I want to challenge you to pick up the phone or send a message to an advisor to get this process started. You aren’t getting married, you are just dating. Take time to ask questions, do your research, and make sure you feel comfortable before you say “I do”.

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As an Investment Advisor with Core Planning, LLC, I work with families and individuals both young and old to achieve their short and long term financial goals. As fiduciaries, our approach puts you, our client, always 100% first. I’d love to start an initial conversation with you and share more about what our firm can offer you!