Hire A Financial Adviser or Lose Money All By Yourself For Free?

During strong markets, anyone can make money. During weak markets, everyone gets hurt. For the most part, all ships rise and fall with the tide, financial adviser or not.happy-and-freeDuring strong markets, anyone can make money. During weak markets, everyone gets hurt. For the most part, all ships rise and fall with the tide, financial adviser or not.

So what’s the point of having an adviser?

(I have my own answer to this question and it may surprise you.)

But before we get to my answer, let’s explore the wild and wonderful world of financial advisers and our clients.

1. Financial Advisers are Salespeople.

I know. I’m a financial adviser. We sell products and ideas. We sell baby….we sell.

In fact, most of our training is in sales, not financial planning and not investment management. If you read “How to Become a Financial Planner” you realize this is true. A financial adviser might have specialized training as a Certified Financial Planner (for example) and that does provide education that helps us plan. But we’re still salesmen. We gotsta make a living and that means most of us are going to sell you something if we can. Show me a financial adviser who has been in the business and survived more than 10 years, and I’ll show you a pretty sharp salesperson.

2. We don’t have a crystal ball.

If you really expect your financial adviser to beat the market year in and year out you should get a job as a stand-up comedian because you’re funny – and not in a good way. If your adviser does great is some years, she’ll do crappy in other years. It’s this risk/reward thing you’ve heard about. (Unfortunately, it is the way the world works.)

3. We have feelings.

If you cut us…do we not bleed? If you tickle us…do we not chuckle?

Yes…. we do.

However, and this is a huge one, if we’re any good, we don’t let our feelings interfere with our work.

This is one difference between us and you that explains why the best of us are worth what you pay us.

I’ve been in this business for over 25 years. Do you want to know how many times smart (I mean super smart) clients call me up with ideas that are super dangerous? How about, “all the time.”

When the market is strong, you get greedy. You want to take more risk and that’s a bad idea. And when I say “bad”, I don’t mean it in the Michael Jackson cool way either. I mean, bad as in…really dumb.

Let’s say you work out a 20 year investment plan that ends up with you sipping Sake on some sandy beach when you retire. You look at a number of 20-year periods and see that the historical worst-case is a loss of 40% for an all-equity portfolio. That’s too steep for you so you select a portfolio with less potential risk – and lower historical worst-case losses.

Everything runs great – until the market takes off. At this point, left to your own devices, you get greedy and put everything into the market. The moment you do that, your risk skyrockets and if things don’t turn out, you might get wiped out.

But if you work with a good financial adviser (and listen to her) this won’t happen. She’ll remind you of your long-term plan and bring you back down to earth. Don’t thank us….it’s our job.

4. We know what works.

I’m speaking here about long-time veterans. We’ve worked with clients for decades and we’ve seen every mistake known to man. We’ve seen what happens when people get greedy or afraid. We’ve seen what happens when people try to predict the future or ignore it. We’ve seen what happens when people don’t force their children to be financially responsible.

Tap into our knowledge and experience. You’ve got one financial life. We’ve been part of hundreds of them. No we’re not any smarter than you are. We’ve just changed more financial spark plugs than you have. We know the right wrench to use.

5. We know what’s good for you.

That’s right. You read it right. We know what’s good for you and you don’t.

How many times have you gone to the dentist for a cleaning only to find out you need a new crown? Me too. It might hurt but you’re better off by knowing the truth and taking care of it…right?

The same thing happens in financial planning. You come into the office thinking everything is “wunderbar”. We stick a financial thermometer up your……I mean…in your mouth……and we tell you what medicine you need to start taking.

We tell you:

Which retirement plan to participate in.

How to protect your beneficiaries.

How often to update your trust and what to look for.

How to balance your portfolio.

How to use Inherited IRAs.

6. We aren’t perfect.

We’re just people. The vast majority of us are honest and want to help you. But a few of us aren’t. You’ll have to use your own judgment to find the right person to work with.

As nice and honest as we are, we make mistakes. We work with a lot of people and we forget things. When we do…don’t get angry. Just remind us and be kind.

Bottom line, being a financial adviser is the best small business idea I could think of. I love being in it. Not because I think I make you more money – although I try to do that as best I can. I’m proud of what I do because I help people get what they want out of life with less risk and less cost.

I charge for what I do and I’m worth it.

Recommendation For Building Wealth

Consider at least being your own financial adviser by by signing up with Personal Capital. They are a free online software which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to manage my finances.

Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going. The best feature is the 401K Fee Analyzer which has saved me over $1,000 a year in portfolio fees I had no idea I was paying. Personal Capital takes less than one minute to sign up and is the most valuable tool I’ve found to help people achieve financial independence.

Updated for 2015


Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

You can sign up to receive his articles via email or by RSS. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information.

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  1. says

    Well stated. My own view is that a lot of people can do their own investing or can do so with minimal guidance using low cost index funds and etfs, with some guidance on asset allocation and thinking about goals. But a lot of people are willing to pay a lot to have a professional manage their money so it’s a great business.
    On the other hand people don’t want to pay for a financial plan where, in my opinion, this is where they need a lot of help. Their insurance is all screwed up, they don’t have beneficiary designations in order, some have no estate plan, and they have given no thought to how much income they will need and when they might retire.
    .-= DIY Investor´s last blog ..Frequent Traveler Must Read =-.

    • Neal@pilgrim says

      I agree…except many people allow their emotions to take over and over-ride their investment logic. A costly error.

  2. says

    I know a lot of people that could really benefit from a financial adviser. So many people do not even understand the basics of financial planning that it is a wonder they have anything when it comes time to retire. For instance, I was talking to someone who had to kids, age 16 and 10 and he didn’t even know what a 529 plan was.

    A think what stops a lot of people from using an adviser is sharing their financial situation, and maybe even revealing some of their financial situation to their spouses. Plus, I think some people don’t even know where they are financially, and would have to get a lot of paperwork together to even get started. Having their head in the sand is a much easier option I guess.

    Good post!
    .-= Kris´s last blog ..What Are You Saving For, Besides Retirement? =-.

    • says

      I believe Kris is exactly right – many people don’t want to even talk to an advisor because they want to keep their financial affairs private. I focus on the investment side but I can’t give advice without knowing the whole picture.
      There are probably some also who don’t want the bad news. It’s like getting a pain in your side and not going to the doctor. You really don’t want the diagnosis.
      .-= DIY Investor´s last blog ..Think you or your advisor can beat the market? =-.

  3. Money Green Life says

    I think there’s so much resource out there that’s free. If people do their own due diligence, they can get the same information, for free. Financial advisers are helpful and people should hire them if they don’t have the time or resources to advise themselves. Otherwise, stick to Google and search for all your answers.
    .-= Money Green Life´s last blog ..Cheaper Gas Is More Expensive =-.

  4. Nunzio Bruno says

    That was a great post! I liked that you didn’t try to sway people away from the relationship between sales person and adviser. A great adviser will always be looking out in their clients best interest and have had the experience of multiple financial life times (great way to put it by the way) not just be influenced by the “sales” aspect of the business. I can’t re-stress enough the importance of finding the right one for you because everyone is different and that financial professionals are people too. Real nice break down of the experience. To the point of people doing it on their own and for free..if you are someone that has the time to put into acquiring the education and savvy to navigate our financial waters then by all means go for it..but for most people its easier to work with someone who has a support system behind them and who will work with you to reach your goals – at least I think it’s worth it.
    .-= Nunzio Bruno´s last blog ..Negotiate Your Debt Like A Pro =-.

  5. says

    Nice post Neal…. I have had financial advisors in the past and one (well two) was from a company…. big pile of crap, changes advisors on me twice and harrassed me with phone calls and unrealistic amounts to put into certain plans….

    The latest was an independent guy and he was great. He helped me buy my flat in London and advised me on things whilst selling too all for what I felt were very small fees (obviously he got a cut from the stuff he signed me up on)…. Anyway I will not hesitate to use a recommended independent in the future.
    .-= Forest´s last blog ..Does A Minimalist Lifestyle Breed Laziness? =-.

  6. says

    This is fantastic.
    There are good financial advisers out there, but it’s too easy to put the ole lamb skin over the wolf in that business. Everyone, ultimately, is their own financial adviser.
    .-= Matt´s last blog ..The Price of Gold Takes Off =-.

  7. Powell says


    Can you provide data on the different ways Financial Planners charge, and what those fees usually are?


  8. says

    There are some people who believe that people should never pay for financial advice. I am not one of them. People need the hand-holding. People need to talk things over with someone they trust.

    I do not think that people should hire financial advisors for their “expertise.” I don’t think our knowledge of investing is sufficiently advanced today for there to be much in the way of “expertise”. The value in a financial advisor comes from his or her ability to relate to your particular circumstances, perhaps have some good stories to tell (because of experience with other clients) and the fact that an advisor can be more detached about your money matters than you can be.

    I wish that advisors sold themselves as people able to provide these soft benefits. They usually do not. They usually try to suggest that they possess special knowledge. I see this as misleading and at times even dangerous.

    .-= Rob Bennett´s last blog ..“One of the Most Ridiculous Is That Buy-and-Hold Led to the Depression and to the Current Crisis” =-.

  9. says

    Yeah, I think the last point is important to remember. Although there are a number of planners that aren’t worthy of your trust, I think there are also many legitimate planners as well. You just need to do your due diligence if you decide to hire one.
    .-= Darren´s last blog ..Free Credit Score From Credit Karma =-.

  10. Aury (Thunderdrake) says

    Investing is a solo thing. But being solo doesn’t necessarily mean being alone.

    But Woe is to the financially illiterate squire who puts all his faith in a financial adviser. And when I began opening up my brokerage accounts, all that became rather clear. She tried to sell me like, 3 different accounts in order to open just one. And just wouldn’t take no for an answer, when I knew exactly what it was that I wanted. She thought she could take a dragon for a fool, hmm?

    The best kind of adviser wouldn’t do that kind of crap to someone. And even the best of adviser has many flaws and a completely different investment mindset (if they invest at all, hah!) People should look out for their own financial future and pursue their own financial education. People will take advantage of others financially left and right. Even advisers.
    .-= Aury (Thunderdrake)´s last blog ..Hoarding Dragon Basics – Investing in Precious Metals =-.

  11. says

    Hmm, the trouble is for every decent, flat-fee based financial adviser who truly wants to help clients, there’s dozens paid by commission (here in the UK anyway) putting their clients onto whatever pays them the best kickback.

    It’s probably easier for most people to learn to invest then to learn to tell a good adviser from a bad one, although using one that’s paid by the hour (instead of with trail commission from the financial companies) is a start.

    No offence Neal, you’re clearly one of the good guys! :)
    .-= Monevator´s last blog ..The biggest threat to long-term wealth =-.

    • Neal@pilgrim says

      Hey M….no offence taken. You may be right. I’ll have to write yet ANOTHER post on how to tell the difference between a decent and rotten advisor. I agree that , either way, it’s a very good idea for people to learn as much as possible rather than rely on blind faith.
      .-= Neal@pilgrim´s last blog ..How To Select The Right Roth IRA Beneficiary =-.

  12. says

    I’ve thought about going down this career path. I realize if I did it would be a 10 year plan.

    Neal, Any advice on going down this path?
    .-= Investor Junkie´s last blog ..Fidelity Investment Rewards Visa Card Review =-.

  13. Charlie says

    nice article. there will always be a need for financial planners esp. b/c they don’t teach us how to manage money in school! The only thing I remember learning related to money was how to fill out a check in 2nd grade. We need to teach our youth how to be smart with their money early on. I would have benefited way more from a class on financial planning and money smarts than chemistry class.

  14. says

    I recommend planners who charge you a fee per visit. You can build a relationship with them over the years if you choose one that’s solid, well respected, and has been at it a while. In this business, gray hairs truly count for something. I wouldn’t recommend an advisor who gets paid via trailer fees from the funds they sell you. Keep your advisor as impartial as possible. Their independence (in most cases) is crucial to your success.
    .-= Andrew Hallam´s last blog ..Financial Evangelist =-.

  15. says

    I certainly think there is a strong role for financial planners today because many people do not seem interested in learning how to have their money work well for them. However, I completely agree with the earlier statement “that a lot of people can do their own investing or can do so with minimal guidance using low cost index funds and ETFs, with some guidance on asset allocation and thinking about goals.”
    .-= Roshawn @ Watson Inc´s last blog ..Do The Rich Pay Their Fair Share Of Taxes? =-.

  16. Single Mom Rich Mom says

    Great advice Neal !!

    What would you recommend someone look for in an advisor? Is it possible to see rates of return by an individual advisor? I’ve DIY’d it so far and done well on my own but I prefer to leave things in the hands of professionals. I’ve spent 20+ years in my industry myself and appreciate the benefit of gray haired knowledge.

    However, like they say – nobody cares about your wealth (or health) more than you do. I paid the price of that by leaving everything in the hands of someone and not paying attention years ago. (Kind of like the oblivious Wealthy Barber). Lost quite a bit of pretty hard earned money at the time and it’s made me leery.
    .-= Single Mom Rich Mom´s last blog ..The $10,000 Trick to a Rainy Day Fund that just grows and grows =-.

    • Neal@pilgrim says

      Hi Mom….(can I call you mom….please???)

      Judging an advisor based on performance is attractive but has it’s drawbacks. It depends on the year-to-year and ALSO over a very long-term. (Anyone can have a lousy year or two or three). Also, the SEC makes it very difficult for most advisors to advertise performance.

      I’m very sorry you had that bad experience. You have done well…maybe the way to go is to simply pay someone to do a financial plan and YOU do the investing….???
      .-= Neal@pilgrim´s last blog ..How To Select The Right Roth IRA Beneficiary =-.

  17. says

    I’m with Monevator on this one. Here in the UK I struggled to find myself a Financial Planner who wasn’t thinking more about his fees than my investments. They also didn’t offer anything I couldn’t do myself and in fact didn’t suggest some of my current low fee/low tax options that I use today. As I state on my blog profile I therefore became disillusioned with the whole industry and decided to go it alone.

    I know I’ve made mistakes however so far these have been less expensive than the financial planner fees I would have occurred. I guess the risk is that I’ve made mistakes that I don’t yet know about. Only time will tell if this is the case.

    Neal you are clearly one of the good guys. I just couldn’t find you when I went on my Financial Planner search meaning I ended up with my current strategy which for now seems to be working.
    .-= RetirementInvestingToday´s last blog ..Australian Property Market (Alternate Data) – May 2010 House Price Update =-.

  18. says

    Great Article Neal,

    I have seriously been considering pursuing some education in Financial Planning and pursuing a Certified Finical planning program to gain some “legitimacy” to the advice I provide to people on the side (right now).

    What I am really looking to do over the next 5-10 years is to get a side-business started where I go in and help people get their financial lives in order. Not necessarily direct them to invest in x or buy various mutual funds, but something more basic like how to make a budget, how to live within a budget, how to manage expectations, and how to compute long-term goals and how it can impact their lives.

    Are these things that financial planners do? Is there people out there who will pay for those type of services (Not break the bank, but compensate me for the time)? Am I living in a pipe dream?

    Again great article. Looking forward to more tips in the future!
    .-= OdysseusToday´s last blog ..How to pick a Graduation Gift =-.

    • says

      People aren’t going to pay you for the make a budget, live within their budget etc.. People who are struggling with those issues can’t afford to pay for an advisor. Those who can are looking and demanding a much higher level of impact on their lives for the fees that you charge them.

      Financial advisers comes in all stripes and capabilities. Each run their business differently based on their abilities.
      .-= Kim | Money and Risk´s last blog ..What Defines a Small Business? =-.

  19. says

    Neal, thanks for writing the article. What about just a one time fee to set everything up, and let the client just tinker with the percentages on their own?

    Is there a fee cap i.e. 1% of assets, or up to $1,000 or something like that in your business? After all, if I had $100 million… a $1 million fee could be a little egregious, or maybe not!

    .-= admin´s last blog ..Searching For Love And A Little More Money =-.

    • says


      From the research I’ve done, the more assets you have some companies manage for you, the lower the management fee is as a percentage.

      Other’s may charge a flat percentage with a maximum cap.

      I guess similar to the different way planners get paid, there are different percentages too. It all depends on the particular planner.
      .-= Darren´s last blog ..What’s More Important – Your Money Or Your Life? =-.

  20. James says

    i have been thinking about hiring a financial planner but now might just bag that idea.

    maybe my finance degree is more useful than the “experts”

  21. says

    DIY Investor,

    True investing advise is more than just the performance or investing itself. It’s also about protection of the portfolio and protection from the investor’s emotions. Unfortunately, the best result is going to come from a good match between investor and adviser. I would advise to run from any adviser who promote themselves on performance just as I would run from any clients who want to judge me on performance alone. No one can control the market and no adviser could have prevented Sept 11 and its effect or the recent oil leak.


    Depending on the advisor, there is value in the “soft” advice that they provide at a fee. It’s not about special knowledge but whether they are truly devoting themselves to a specific niche and keeping up with all the advances and regulations and CASE LAW. I spent most of last week explaining tax laws on retirement plans for some of my new clients’ CPAs. (I shouldn’t have to do that.) There are mistakes on 80% of reviewed tax returns. The fees that clients pay have been more than compensated by the tax refunds or tax savings that they got. It’s the client’s responsibilities to make sure that their advisers (of any stripes, lawyers, tax, etc.) are capable and truly knowledgeable.

    Money Green Life.

    Google is a wonderful thing but just because you read it on the internet doesn’t mean that it’s true.


    Let me give you an example: Today, American Express Open Forum tweeted an article written by one of their experts that touted using 401K plans as capital for your own business. The writer cited a MSN Money article from 2009. In fact, he copied part of that article word for word as his own. What neither of the articles brought up was that the IRS frowns upon any usage of 401K assets for your own benefit. There are very strict requirements (which neither articles brought up) that disqualifies about 99% of cases that tries to do this. People who blindly followed these articles would have put their entire 401K balance at risk of losing its tax deferred basis and accelerated massive amount of income tax and penalties.

    Whether you work with an adviser or choose to do it on your own, the onus is on the consumer to be educated and use common sense.


    As to fee or commission, there are bad apples in every barrel. I’ve seen many fee based advisers who have done diddly squat for their clients in decades. One adviser hasn’t talked to his client in seven years yet was very diligent in charging his 1% fee. The question that you need to ask is: What is the value that the adviser is bringing to table for me and are they charging a fair price for that service?

    A valid business person has a business to run and charges a fair price. Otherwise, they won’t stay in business.

    If I am sick, I prefer going to a doctor to diagnose me. I can verify what he tells me through second opinions and research but I’m not going to try and operate on myself.

    The problem with any field is that you won’t know what you don’t know. The key is to find an adviser who will help identify what you don’t know, educate you, give you the information to make a decision and go from there. At the end of the day, the choice is in the hand of the investor.
    .-= Kim | Money and Risk´s last blog ..Is Your Facebook Friend a Spy or IRS Agent =-.

  22. Personal finance says

    Financial advisers are a key guide to financial planning. This is because they have gained knowledge about market volatility and know what could be the results (not always but most of the times). It is necessary to take at least an advice if not full time guidance.

  23. Scott @ Credit Restoration Services says

    I think the root of the problem is people often randomly contact financial advisers – or get a referral to someone who isn’t really suited to their needs. The key is to look for the right match for your financial targets. Advisers that have been doing their craft for so long they have already developed expertise in specific areas and are often the cream of the crop.

    A true financial adviser can review and even foresee financial problems before they arise; they can also help take corrective measures for unpleasant outcomes of things that happened in the past, especially in areas of investments, insurance, retirement plans, estate planning and income tax.

  24. Mel says

    Is there anyone who charges based on what they actually make for you rather than assets you bring to the table that you accumulated on your own? I understand paying an hourly fee for advice on a specific area, but I never really understand the concept of paying someone a percentage of the money they had nothing to do with creating. I would prefer it if my advisor has a good year when I have a good year, and takes the lumps along with me if I don’t.

  25. says

    I would hire a financial adviser myself because I often find myself in financial dilemmas. In those moments I wish there was someone with me to tell me what is smart to do.

  26. says

    Well said Neal.

    I appreciate your candor and honesty.

    I’d love to hear your thoughts about the balance between people trusting a professional adviser vs how much education they need themselves. I ask because I know that it isn’t possible for people to become investment experts (nor should they) but I’m also 100% against being ignorant about where your money is invested.

    How do you advise your clients in regards to how informed they should be about their investment options before they write a check or become involved?

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