Strong Reasons For Hiring A Financial Advisor Or Investment Manager

Although I'm a DIY investor and encourage people to figure out how to invest themselves, there's absolutely a place for hiring a financial advisor or investment manager.

Back in 2015, I did some consulting for a startup called Motif Investing down in San Mateo. I remember talking with a person in marketing about what she liked to invest in.

Instead of telling me about various stocks or index funds, she told me she had been accumulating cash for the past several years. At 33 years old, roughly 70% of her portfolio was in cash because she didn't know what to invest in!

I was surprised to hear her portfolio composition. She was working for an online brokerage that created various thematic portfolios (motifs) for their users.

The investment ideas were endless and the cost to invest was extremely low for the time. Yet she still was stuck, unsure what to do with most of her capital.

A financial advisor would have definitely helped.

Why You May Want To Hire A Financial Advisor Or Investment Manager

The biggest pushback against hiring a financial advisor or investment manager is the cost. In a world where everybody wants something for free, paying for advice or portfolio management can feel abnormal.

However, there may come a point where paying for financial help might be the best thing you can do for your financial future. Here are some reasons why you should hire a financial advisor or investment manager.

1) You don't know where to start.

The hardest part of doing a lot of things is starting. When it comes to investing, the sheer number of investment options can be overwhelming. Therefore, some people simply tend to hoard cash. Cash is familiar and easy. Cash also doesn't lose absolute value.

However, if you end up holding the majority of your portfolio in cash during a bull market for years, you end up missing out on a lot of gains.

A financial advisor or investment manager helps create a financial action plan for you. They will help set up a risk-appropriate investment portfolio. And, they will even manage your portfolio for a fee.

2) You are too busy to stay on top of your investments.

Imagine having to work from home with two kids out of school for the last 18 months. You're barely keeping your head above water. You'd love to review your investments and put more cash flow to work. But you simply don't have time.

As a result, you aren't conducting any tax-loss harvesting. You aren't rebalancing your portfolio to a target allocation every quarter either. Further, you've let your cash pile up as well.

People hire others to mow their lawn, clean their house and cut their hair. There's no shame in hiring a financial advisor to stay on top of your investments. For those of you who invest in active funds or private funds, hiring a financial advisor can provide more guidance.

3) Money stresses you out more than the average person.

There's something to be said about farming out your investments to an investment manager so you don't have to think about your money as much. During volatile times, it may be more comforting to know someone is watching out for your money.

For example, if your DIY portfolio was down big during March 2020, you probably blamed yourself. Your stress may have spilled over to your partner and children. It's easier to get moody when you're losing years of savings quickly.

However, if you had money with a robo-advisor, you could have blamed it instead. Blaming someone else often feels better than admitting fault, even if the outcome is the same. It's just human nature to give ourselves credit for our successes and blame others for our failures.

Psychologically, compartmentalizing your money with a money manager may give you more peace of mind to focus on your main way of making money. I've been investing our family's money for 20+ years and it can sometimes feel like a stressful full time job.

4) To protect yourself from yourself.

One of the benefits of having a financial advisor is that you better insulate yourself from bad financial moves. It is much easier to hit the sell button during a financial meltdown when you are managing your own money.

The ease of panic selling is partly the reason why I prefer investing in real estate. The difficulty in quickly selling real estate saved me from selling a home right before the housing market took off in 2012. The illiquidity of real estate forces owners to be longer-term investor, which is generally a good thing for returns.

If your money is with a financial advisor, then you would have to contact your financial advisor and then panic sell. During this time, your financial advisor might convince you not to walk off the ledge. You might also calm down on your own.

The harder it is to trade, the less you will trade. But if you've always got a jar full of freshly baked cookies in your kitchen, you won't be able to help yourself. In general, trading in and out of positions is a suboptimal financial move.


5) You have too much money at stake not to get your investments right.

Let's say you have $5 million in investable capital. You accumulated your $5 million as an early startup employee for a visual design company. Your expertise is design not in investing.

With so much capital at stake, you don't want to mess up your returns. The difference between a 5% return and a 10% return is $250,000. Therefore, you decide to hire a financial advisor for a fixed fee to tell you how to invest.

Even though the fee cost $3,000, you are still much better off than had you kept all your capital in cash and Treasury bonds in a bull market.

Or maybe your financial advisor advises you not to angel invest $50,000 in a particular startup that ends up going out of business three years later. Having a voice of reason when every investment pitch sounds fabulous can be very helpful.

Once you get to generational wealth level of money, or the ideal net worth amount for retirement, you've got more at stake. As a result, hiring a financial advisor may be more impactful.

6) You're interested in learning about portfolio construction to eventually DIY.

Let's say you have a modest $50,000 in investable capital. You're 26 years old and just starting off on your long investing journey. The easiest way for you to boost your wealth is to focus on your career. At the same time, you are very interested in learning how to be a DIY investor.

One way to learn how to be a DIY investor is by investing your $50,000 with a robo-advisor like Betterment. Betterment charges a 0.25% fee of assets under management. In other words, you pay $125 a year in fees for a $50,000 portfolio, which is dirt cheap. In exchange, you get:

  • Low-cost investing portfolios built and managed based on your priorities
  • Socially responsible investing options
  • Account choices, including joint accounts, IRAs, and trusts
  • Automatic features like portfolio rebalancing, dividend reinvestment, and auto-adjust
  • Advanced tax-saving strategies like tax-loss harvesting and asset location
  • Add Checking and Cash Reserve with no additional fees

After three years of letting a robo-advisor manage your money, you might decide you've learned enough about portfolio construction to just create your own portfolio. During this three-year period, hopefully, your portfolio will have gained in value as well.

There's no better way to learn than to learn by doing with the initial help of a coach. Once you've learned the fundamentals of investing, you can go work out yourself.

7) You want to gain access to special deal flow.

I randomly met the founder of ICONIQ Capital on the tennis court the other day. ICONIQ Capital manages around $70 billion for the likes of Mark Zuckerberg, Jack Dorsey, and a bunch of other very wealthy people.

Paying an asset management fee on big money means big money for the money management firm. However, what's unique about ICONIQ Capital is that it not only manages money, it also invests in venture capital, private equity, and real estate. It also has its own funds.

Given the size of ICONIQ Capital and its exclusive clientele, it has access to deal flow that isn't available to the average person. For example, some of its early investments include Zoom, Airbnb, DocuSign, and SnowFlake. A 0.5% fee on $1 billion is $5 million. But if the firm can return 20% in one year, that's $200 million.

Therefore, paying a management fee to access exclusive deal flow can be very worth it. If you hire a financial advisor, ask what type of deal flow they have. A common benefit may be getting IPO or investing shares in a company your financial advisor is taking public. Or, your money manager might have access to secondary shares.

Traditionally, firms such as Goldman Sachs, Morgan Stanley, and JP Morgan have some of the best deal flow. However, the space is extremely competitive and the league tables are changing all the time.

8) You're Constantly Unsure About How To Invest

Recently, I had over $520,000 in equity structured notes come due. As a result, I had to figure out how to reinvest the proceeds, save the money, or spend the money. This was a relatively cumbersome and stressful experience.

If you invest with a robo-advisor or financial advisor, they can help take that stress away by reinvesting the proceeds for you. Once the responsibility of investing specific sums of money is off your shoulders, you don't worry about it as much. You already made the choice to hire help.

Given I don't have a financial advisor, I decide to invest half the proceeds in the S&P 500 and sit on the other half. At least this way, I invested inline with my uncertainty.

Financial Advisors Fill An Important Need

A financial advisor isn't going to solve all of your investment problems. Financial advisors are human too, which makes them susceptible to mistakes and the usual emotions of fear and greed.

However, I think it's worth it to pay a financial advisor or sign up with a digital wealth advisor to help you get started. It's also good to pay a financial advisor to help you stay on track.

If the alternative is not doing anything with your cash, then hiring a financial advisor or paying an asset management fee is the preferred choice.

Part of the reason why digital wealth advisors have flourished over the past 10 years is because there is a huge need for lower-cost financial advice. And some people will always want someone to talk to, which is why the hybrid model of using algorithms and advisors has also done so well.

A Cap On Advisor Fees

Personally, I find it extremely difficult to pay an ongoing 1% financial advisor fee once your portfolio crosses over $500,000. 1% of $500,000 is $5,000, every year, as long as you let the financial advisor manage your money. For $5,000, you can easily learn all there is to know about investing your money.

Now imagine if you had $5 million or $10 million in investable assets. Paying $50,000 – $100,000 a year in financial advisor fees seems egregious. It's as egregious as still paying a 6% selling commission on a multi-million dollar house.

Thankfully, the management fee percentage declines the more assets you have managed.

I know it's not good for the money management business, but capping fees or introducing a scaled flat fee is good for the consumer. And I'm always going to advocate for the consumer on Financial Samurai.

Financial advisor fees - The burden of a 1% fee on $10,000 invested over 35 years

Lower Rates Of Returns Should Also Mean Lower Fees

Further, if the expected return for various asset classes in the future is lower, a 1% advisor fee is even more painful.

In the past, I've been mocked for recommending a lower safe withdrawal rate in retirement. This is despite my logical arguments and the fact that I'm trying to live the retirement life and not just pontificate about it. When you don't have stable income anymore, you will face hard-to-quantify psychological money challenges as well.

So if you don't believe in my reasonings for being more cautious about your withdrawal rate in retirement, perhaps you might want to listen to Vanguard.

Below is the 10-year median forecast of U.S. stocks, bonds, and inflation by the Vanguard Capital Markets Model® (VCMM). It came out a full year after I suggested reducing your safe withdrawal rate to about 0.5% when the 10-year yield dropped to 0.7% in August 2020.

If your blended portfolio of stocks and bonds returns 3% and you have to pay a 1% fee, that's a net return of 2%. And if inflation is 1.58%, then your real rate of return is only 0.42%!

Let's hope Vanguard is wrong about its forecasts. However, if they are right, following the Financial Samurai Safe Withdrawal Formula = 10-year yield X 80% for the first several years of retirement is prudent.

Vanguard forecasted 10-year return for U.S. stocks, bonds, and inflation - why financial advisor fees should be lowered

As with any service, make sure you are getting your money's worth every year. Maybe you want to ask your financial advisor to do a quarterly investment checkup. Or maybe your financial advisor has free tickets to NFL football games.

Thanks to a tremendous bull market since 2009, it's hard for financial advisors and investment managers to do wrong. Most financial advisor clients should have benefited more than the fees they have paid. Let's just hope the same happens during bad times as well!

It is really during the bad times when financial advisors and investment managers can really prove their worth. Don't underestimate the value of someone being there for you when things go to hell.

DIY Investor Free Tool

Regardless of whether you hire a financial advisor or not, it's important to always stay on top of your finances. The way I've been doing so since 2012 is with Empower's free financial tools.

Empower easily enables me to track my net worth, highlight where I'm paying excessive portfolio fees, calculate my future retirement income, and so much more. Before Personal Capital, I was just tracking everything with an Excel spreadsheet.

The better you can track your finances, the better you can optimize. If you find yourself needing more help, you can always get a free portfolio consultation later.

Free investment checkup tool to ascertain proper asset allocation
Investment Checkup free tool

Invest In Real Estate To Diversify Your Investments

Real estate is my favorite asset class to build wealth. Not only does real estate provide income, it is less volatile and provides utility. Since 2016, I've invested $810,000 in the Sunbelt region where valuations are lower and net rental yields are higher.

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private real estate funds. Fundrise has been around since 2012 and now has over $3.5 billion and over 450,000 investors. Fundrise's focus is on residential real estate in the Sunbelt region where valuations are lower and yields are higher. The demographic shift toward lower-cost areas of the country is a multi-decade trend. 

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. Growth is likely higher as well due to strong demographic trends. With more capital, you can build your own select real estate portfolio.

Both platforms are free to sign up and explore. 

Related posts about financial advisors:

Questions To Ask A Financial Advisor Before Hiring One

Should Your Financial Advisor Be Smarter And Wealthier Than You?

Readers, what are more reasons for hiring a financial advisor? How has a financial advisor or investment manager helped you build more wealth?

For more nuanced personal finance content, join 65,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Everything is written based off firsthand experience. 

41 thoughts on “Strong Reasons For Hiring A Financial Advisor Or Investment Manager”

  1. Lily Bridgers

    So, my folks are on this whole “adulting” kick, talking non-stop about hiring a financial advisor to handle their 401k rollover. They swear it’s like entering a financial wizard’s realm, and suddenly they’re throwing terms like “diversification” and “retirement planning” at me. It all makes sense though because you said that hiring a financial counselor may be more beneficial if you reach the generational wealth level of money, also known as the optimal net worth number for retirement.

  2. Victoria Addington

    I appreciate you mentioning the benefits of employing a financial counselor. As you pointed out, it can be useful to have a voice of reason when every investment offer seems amazing. I’ll be sure to tell my aunt about this as she’s been looking to invest some of her money. She might benefit from having a financial investment consultation with a pro. I’ll definitely look into specialists who could help her.

  3. It’s good to know that they can create an action plan. My brother was telling me last night about how he wants to make sure that he does everything financially correct for his work, and he was wondering if hiring a professional would be a good idea. I’ll make sure to pass this information along to him so that he can know the benefits of hiring financial help.

  4. I like the idea of having a financial advisor, someone I could discuss ideas with, but I was burned twice when I was first starting out in my 20s. My money kept getting placed in poorly managed mutual funds that I’m pretty sure only benefitted the advisor. It seemed like every year they transferred my money to new funds because the other ones closed. I was told at one annual review that I had a pretty good year making 4%. I mentioned to my advisor that the market did 10% that year and he just said yes that is correct. I then asked for all my money to be moved into index which turns out they didn’t offer. I moved my money to Vanguard and began teaching myself investing, even getting an MBA in the process. I’m not sure I could ever go back to an advisor.

  5. Advisors can be a great choice or a poor choice. However, it boils down to are you a DYI, an automated investor (i.e., Target funds), or handholding investor (professional management). While there are obviously other reasons for advisors (access to special investments and etc), most people fall into these buckets. If you can comfortably manage your portfolio or are fine with being hands-off and not having someone to talk to DYI and target funds are fine. However, risk tolerance is crucial or you will likely find yourself panicking during market turbulence and making irrational decisions. Even with an advisor, this behavior will not go away, but you will have someone to talk with. Choose what makes you comfortable and don’t ding others for their choice is all I can say!

    1. I have small explore. I’ve felt that the U.S. would have the greatest innovators, hence heavily overweight.

      But I’m buying Chinese internet stocks now. They’ve been crushed.

  6. So if Vanguard predicts such low returns for the future, I’m wondering if we’re we better off staying in growth stocks and ETFs for a longer time (assuming the greater risk of course)?

    1. I’ll discuss more about Vanguard’s expected future returns in an upcoming post. But yes, look out and beware. We could easily see a correction.

      Personally, I’m saving up cash and looking for real estate opportunities. I can easily earn a 4% cap rate (stock forecast). Add on potential real estate price appreciation, and real estate is my favorite asset class.

      1. Personally, I expect that mushrooming automation will continue to increase capital based earnings as a percentage of earned income, with the necessary concomitant decrease in wage-based earnings, for the rest of the decade.

        This indicates to me that growth investments will, on average, prosper greatly, but by the end of the decade, the folks solely dependent on wage-based earnings will be in rough shape, thus decreasing demand and greatly reducing growth in the markets.

        While the folks who were well and heavily invested will have done fine, they will suddenly find themselves in an environment where there are too many investment dollars chasing too few good investments.

        I hope I’m wrong, but I think that might hinge on some incredibly smart politicians figuring out and taking effective action (in other words, a fairy tale) or upon some technological breakthrough (either unexpected, or arriving decades early) greatly changing the investment environment.

        As for real estate? It has no saving grace that I can see. During the Great Depression, landlords were bulldozing their rental properties to avoid paying taxes on them.

  7. Paper Tiger

    I’ve spent over 40 years managing my own money and planning FOR retirement but I am realizing that it may now make sense to get some help managing my money AFTER retirement.

    Like others who have commented, it is going to get much more difficult to keep and pass on our money to the next generation because of all of the talk around taxes and soaking the wealthy.

    I never dreamed that managing and preserving our money may actually be more difficult than accumulating it.

  8. I agree that the 5-6 % brokerage fee to sell a house seems too much.
    What do you think is the right solution to this issue? It reminds me of the days of $30 per trade commissions for stocks for the individual investor. There are some discount brokerages such as Redfin, but I don’t know think they have gained enough traction to disrupt the status quo of the traditional brokerage model. I’m up for brainstorming and working together on something if you ever wanted to explore a new brokerage model!

    1. I do like Redfin and am a shareholder. The solution is to go on strike and never sell until commission rates come down to more reasonable levels.

      The great irony of high commission costs is that it makes it harder to sell, which is enabled homeowners to get wealthier.

    2. In business as in life, you don’t get what you deserve. You get what you negotiate.

      If that makes you uncomfortable or you’re not good at it, then be prepared to make less $$ and pay more for everything. There’s a reason that all the people at the top of business are low on the agreeable personality spectrum.

  9. I wonder from time to time if I should have a wealth manager when I’m set to retire. I am trending towards $10 million in retirement savings when I decide to call it quits and I will definitely need the help to learn how to cash out my various investments in a tax-friendly way. I always see the standard 4% withdrawal rate everywhere but no real advice on exact strategies to sell your stocks. Even if I wanted to cash some out now of my brokerage account, I really don’t know the best way to do it.

    1. Everything you need to know is available on the web for free, if you go looking for it. Learning enough, without any guidance, will probably require about an hour a day for 2 or 3 months. One of your goals should be knowing how to file your own taxes, regardless of whether you do it yourself or not.

      I assume you are somewhat clever and know how to use simple spreadsheets.

      You will never find a wealth manager who cares as much about your investment as you do (or charges you a lower percentage for managing it) than yourself.

      If you start getting in to multiple tens of millions, that might be when you need professional assistance, and I don’t mean the friendly and glib man in your local Edmond Smith’s Financial Services Incorporated office.

  10. John and Rosemary

    Liked the article again Dogen. You are hitting some home runs here. Can’t believe the financial acumen and common sense of of your “amature” commenters. Absolutely stellar.

    But aren’t those kind of expensive NFL tickets you alluded to? :) Maybe one of those startup ticket finding services would leave you more money positive? :)

    Each tax season we have wished for some kind of check list or concept helper to go through to help our feeble brains decide on the difference between a tax loss harvesting “gain” and simply stupid “buying high and selling low” loss.
    We don’t have the cognitive capacity to do it. Maybe because it involves too many unknowns. We probably wouldn’t trust an algorithm helper and it’s forced assumptions anyway. Back when we were sitting in front of our Commodore 64’s there was a premonitory phrase which the young people might not remember. “Garbage in, garbage out.”

    So maybe try to examine the built in assumptions of your algorithm before you decide to trust it with your hard earned. Make awfully sure the assumptions and future casting in the algorithm actually fit you and your life situation. Take some time also to think about what “is” actually “you”. We like the Yogi Berra quote. “The future ain’t what it used to be”.

    We like the assertion that you may need an advisor when you are starting out. But the essential corollary to that is you definitely need a person wiser than you to help you sort things out when you are starting to think about ending up. About how to get the majority of that wealth to those grandchildren and those charities when you are done using it.

    Makes us cry (yes, tears down the side of our faces) when we hear politicians talk about helping American families out of one side of their mouth while simultaneously saying let’s eliminate the step up in cost basis as those same families try to pass on investment gains they have scrimped their entire lives for. (Ya’ Joe, talkin’ to you.)

    Okay, we’ll get off our pity soap box and enjoy the rest off our day rv boondocking here in the Rockies. :) (Hoping the sun shines enough to solitary solar panel charge our dinky self-rigged AGM batteries) :)

  11. Had a question. I am 39y/o. Currently I have 620k in 401k. Invested in schwab s&p all 401k contribution goes to this fund. 200k saved for down payment. 50k in stock account buying individual stocks (down 1% on year). Question is as I continue to save 30% of income monthly where should this money go?

    1. A great question for a financial advisor! I know Personal Capital, the leading hybrid digital wealth advisor, is doing free portfolio consultations. You’d have to link up your accounts and the schedule a call online or in the app.

      I did one consultation myself a long time ago and I thought it helpful to see where my portfolio was too heavy versus their recommended models for my age.

      Having a second set of eyes review your portfolio is always helpful, especially if that’s what the person does all day and sees other portfolios from people of similar age and circumstance.

  12. I will assume most of you here did not inherit a large sum of money from your parents when you first start out on your own.

    Your first sizeable sum of money is earned from laborious careers. And yes, even if you have a PHD and is working for others, it is a laborious career.

    Your employer has an excellent business model and is taking a calculated risk by add you to the payroll. Thus, it is totally acceptable for your employer to get the first cut of profit before giving the paycheck for the compensation of your time and effort. Note that in bad time, your employer will carry your weight!

    Now once you have accumulated many paychecks and become an employer yourself. Your company hires a “Financial Advisor” who takes NO RISK, yet get the first cut REGARDLESS if he/she performs or not!

    This business model will fail soon or later!

    A famous Chinese historical figure once said “I rather failed myself than let the world fails me”.

  13. How many investors do you know that qualify for special deal flow? That requires at least an accredited investor designation, and a qualified purchaser would likely be the appropriate target audience. Really don’t understand why that conversation has any place in an advisor 101 article.

    1. Sure, the answer is plenty. In the past, having a financial advisor / wealth manager was largely a perk of the wealthy.

      When I was at Goldman Sachs, their wealth management division had a minimum asset amount of $25 million. When I spoke to Chase Private Wealth several years ago, they wanted to manage at least $1 million.

      Over time, fees and investment minimums come down.

      I hope this helps you better understand. A lot of people would love to have access to special deal flow. But they can’t b/c they don’t know someone or the demand is too great. For example, everybody would love to invest in the next Sequoia fund. But few can.

      Do you mind if I use your comment for a new article “Really don’t understand why that conversation has any place in an advisor 101 article.”?

      Also, please share something about yourself so I know where you’re coming from e.g. accredited, unaccredited, investor in private equity, etc. Thx!

      Related: How Many Accredited Investors Are There

      1. Even if one is a credited investor, how does one find a financial planner with access to special funds and investments?

    2. Why would highlighting the benefit of deal flow access be irrelevant when discussing the benefits of hiring a investment manager?

      For the money you pay, gaining investment access to promising opportunities can be huge for returns.

      What’s wrong with thinking? That’s like saying someone shouldn’t speak in a different language or try new things. Open up your mind instead of being so myopic.

  14. Glad you wrote this post. I’ve struggled with this topic. I had an advisor with ML for a bit when I had only a few hundred grand through a family friend, then dropped them. I was DIY and got my net worth from 200K all the way to $1.3M by just being disciplined, maxing out 401Ks, and setting up automatic investments in Index Funds. And this was in the middle of getting divorced and having to “give up” a few hundred grand plus ongoing child support. I also am very fortunate to make a lot of W2 income. I’m 42 years old, with a total NW of about 1.7M (1.4M in the market, 300K in real estate)

    All that being said, I went with another family friend advisor about 9 months ago. My reasoning was:
    1) As I started to make more money and feel like I could play around, I made several dumb investments over the last few years…stuff like Cannabis stocks that lost 20K, etc. Granted, I did make some “good” bets too, but even those I’d sell too quickly and have regrets.
    2) I would obsess about my stocks, check them multiple times a day, etc. It was a big source of anxiety.
    3) While I’d say I’m really good at being disciplined and consistent and earning a great living, I’m mediocre at best at doing actual financial research, so my bets were based on very surface-level information.
    4) There were increasing tax-related implications to my decisions. For example, where do I invest certain ways in 401Ks vs. after-tax accounts, HSAs, 529s
    5) I felt like I should have someone since I have over $1.3M in retirement and non-retirement accounts and quickly growing. Just seemed prudent.

    So, for these reasons, I pay a little less than 1% a year now. That percentage will go slightly down as I creep up in the total amount invested. It does irk me though, as at this point I don’t feel like they’re doing much that I wouldn’t do myself. My hope is as I get to $2M, $3M, and beyond, there will be more of an ROI.

    1. There should be more ROI, however, it starts getting tough paying those higher fees as well. 0.5% on $3 million is $15,000 a year. At that fee amount, hopefully you are making at least a 20X greater return. But there’s never a guarantee.

      And if you lose money and have to pay a 0.5% fee, then that becomes a real bummer.

  15. AUM fees will be obsolete as they are outrageous and grossly overpaid
    There are a growing # of fee based advisors out there

  16. Spot on pros of having a financial advisor. Your first example of that woman who worked for a brokerage yet she still had a hard time investing. I think a lot of people feel that way – too afraid to put their cash to work because they lack confidence, knowledge, or the needed discipline to start and stay consistent. Although it can be annoying to have to pay fees, the added cost is totally worth it if you aren’t able to regularly invest and rebalance on your own. And thankfully there are so many low cost managers now to choose from.

  17. I can imagine how Personal Capital manages stocks, bonds, mutual funds, and ETFs. But how does Personal Capital work with clients that with multiple alternative investments like FundRise, individual direct and fund investments like Crowdstreet, plus direct investments like personal loans via a financial institution. For example, how would they handle the multiple alternative investments like you have?

    1. Excellent question. Since Personal Capital uses a hybrid model of advisor + algorithms, the advisor will talk through asset allocation of alternatives.

      I use Personal Capital’s free tools and manually label and asset allocate my alternatives that can’t be easily tracked.

      If you use the lowest fee service for Betterment or Wealthfront etc, then they are just managing your public investment portfolio. They couldn’t even manage your 401k or IRA until recently.

  18. My big reasons for going with a Financial Advisor to start off with were #1 (not knowing where to start) #2 (too busy) and #5 (I thought too much was at stake). I also have another reason – I grew up with my Grandpa as an advisor, so I just thought it was what you do to invest.

    But I have since learned that #1 and #2 were poor excuses. Once you get yourself caught up by reading books like The Simple Path to Wealth by JL Collins or The Little Book of Common Sense Investing by Jack Bogle, you will start to see that investing is actually quite easy.

    I agree that DIY investing is not for everyone, but it was pretty painful to pay an AUM fee and feel that I was not getting my money’s worth.

    Since taking over as a DIY, I have gotten my fees down from >1% to .05%. Not only that, but I have been able to correct my allocations to my actual risk profile, and thus far have outperformed anything that my advisor was doing simply by investing in low-cost index funds.

    Anyways, I think flat fee advisors are the way to go if you feel you need any help. Certainly, I would rather pay someone a flat fee up front or anytime I speak with them like an accountant versus the runaway AUM fees.

  19. The best part of this article is the reinforcement of having an advocate when things go to shit.

    The best investment discipline I have learned is; assuming you believe in your strategy – DO NOTHING when emotions are high or alternatively, do the exact opposite of what your emotions want at the moment.

    Having someone to talk to is valuable.

    This discipline has saved and/and or made me lot’s of $ over the years

    I recall wishing I had more $ to invest in Q1/20. Seemed like it was a once in a generation opportunity to buy good companies on the cheap.

    1. Yes, having an advocate or a money psychologist during very difficult times is extremely valuable.

      My hope is that through my newsletters and posts I’ve helped people think more rationally and calmly since 2009.

      The key is to stay the course for the long-term until you are OK with the decumulation phase!

  20. Chris Blethen

    Hey Sam. Great website and blog you have. Really enjoy FS! We’re 53 and mostly retired after buying, running and then selling a few small business. After reading about multi family commercial RE we took a 3 day course and found a great apt bldg in Richmond VA and after talking to the bank and getting an all clear we pulled the trigger in Sept 2017 and it’s been amazing not having to work. I’ve been a diy stock investor and realized I hate bonds! So I decided to make RE the Bond part of my portfolio. Same general return 3-4% on avg plus we get to visit it and manage the managers and take them out every year because they are awesome!

    So here’s my take on financial planners. I do it myself but we do use a fiduciary who keeps us on our planned path. My wife is a cpa so she’s the math wiz and she charges us $2500 a quarter for keeping us in our plan and coordinating our financial map with all our accounts on a portal to keep correct financial accounting. Our break down is 46% in stock mkt 38% in RE and 16% in PE/VC/IOU’s

    TNW is about $10M+. We should reach “Escape velocity” in the next 2-4 years then the sky’s the limit. It’s not like we’re geniuses we’ve just kept from making stupid decisions with money. Thank you so very much for your hard work, putting yourself out there and for being the mind behind FS!

  21. Thanks for the interesting article. Regarding the fees, it certainly difference between practices. I manage nearly 1B in assets, yet charge an annual fee on less than half of that cap… The ability to get certain alternative investments, like private real estate deals in this environment, have also been a nice value add in winning business from folks that normally would have been a DIY. Thanks again for all that you do.

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