Worth it to hire a financial advisor?

Question

Is it worth it to hire a financial advisor? The one I found seems to understand my investing goals and my tolerance for risk well. Its a $1,500 annual fee and I'm nervous that they might just try to sell me life insurance or something. What is your experience? What should I look for in a financial planner?

Cynthia Meyer · Answer

A financial planner can be a great boost to your situation if the planner 1) is comprehensive - looks at your total financial picture including your real estate holdings 2) can explain concepts in clear language and 3) can coach/mentor you in areas of your financial life where YOU want to make progress (things like launching or building your real estate or other business, understanding your securities portfolio, protecting your family, etc.). Make sure your planner is a CERTIFIED FINANCIAL PLANNER®
 and understand how they get paid for working with you (Either Fee-Only or commissions/product sales). If you work for a company, you can also see if they have a Financial Wellness employee benefit.

Mike Dymski · Answer

For 95% of savers - buy VTSAX (vanguard total stock market fund) through a discount brokerage and term life insurance online if you have dependents.

Alecia Loveless · Answer

@Sierra Michie I’m 49

Years old. Last year after watching my investments flounder for years I decided to put my money with a financial advisor. I had no idea where to start but am a bit of a Dave Ramsey fan so I went to his page and found someone there. I did my own homework at that point and did some further vetting of him.

We connected and had some in depth discussions around my financial investments and my real estate holdings. He has both types himself and was quickly able to make some determinations about my real estate. As a Dave Ramsey guy he did point out that my situation would be better if I could pay off my debt on the real estate but let me know that he understood why I had the mortgages and that he could help me out with that as my finances grew.

I had previously been returning an abysmal growth rate on my self-managed investments of about 2%. In the 14 months the advisor has managed them they are up about 30%.

I know the market is pretty high right now so perhaps that return may not surprise some people but the advisor has knowledge of different types of products to put my money in.

So far I’m totally satisfied with hiring the advisor. My mom was against it when I did it and was the biggest naysayer. Sometimes you just have to go with your own instincts. I think for a $1500 annual fee it would be worth it to try for a couple of years. I don’t think you should make any snap decisions to remove the advisor based on initial returns if things go sour due to instability from the government. Even the best advisor will have problems if the market tanks.

V.G Jason · Answer

Agreed, for the  most part. 98% of people here on these forums and in the country are better off with a simple portfolio bought every Friday like clock work.VTI-75%VXUS-20%GLD-5%If you need someone special to tell you what to do, money is better spent on a CPA for tax advice than a CFP or FA. If you're willing to be more risky, you can add 1-2 indices extra that offer more upside, but understand drawdowns are higher. Outside of that, KISS is best for most.

Bill Hampton · Answer

@Sierra Michie

Yes, a fee-only financial planner can help you create a comprehensive financial plan including a spending plan, tax planning, asset allocation, retirement planning, education planning for children and grandchildren, and estate planning (wills and trusts). Most people need help in one or more of these areas. If you need help in one these areas I recommend that you have consultations with a few financial planners, ask about their services and pricing. Most fee-only financial planners will save you a lot more than they charge you. Fee-only financial planners won't try to sell you life insurance or the latest hot stock. If they do, run.

Good luck.

Marcus Auerbach · Answer

How much value can you realistically expect from a $1,500 per year engagement? I guess it depends on what you are looking for.

Personally, I would not, but that's only because I like understanding and doing things myself. Before real estate I have spent a decade investing in stocks and learning as much as I could and also got suckered into the world of financial advisors who basically sell diversification that comes at the cost of mediocre performance and fees skimming off the top.

So, here is what I believe: long term almost nobody beats the market, so for most people who don't mind spending the time and really become a stock market expert it's probably best to just automatically invest monthly in a low-cost index fund like the VFIAX that mirrors the S&P500. Don't take it from me, take it from Warren Buffet.

Here is the other option: you can just go on ChatGPT (the paid version) and start a custom GPT called "My financial advisor". Prompt it to act as your expert financial advisor. Then feed it with everything there is to know about your current situation, your financial goals, priorities and risk tolerance. If you have statements, spreadsheets or even pictures of charts, upload all that as well.

You'd be surprised about how deep you can go with questions - and you don't have to worry about beeing sold some life insurnace.

Daniel Murphy · Answer

As a financial planner myself, my opinion is biased, but I believe that the answer is yes, it's worth it.  Whether it's worth that $1,500 is up to you...

Google "Vanguard Value of an advisor".  I like this because Vanguard is the industry leader in DIY investing. So they are biased also, but they still equate value of working with a financial advisor.  Very little "value" comes from investment picking, mostly it is from behavioral coaching, tax planning etc.  The stuff most people don't like.  It's a very hard to quantify value...

One thing I'll say because it's a personal rub... Ignore the "they have to be a CFP" or "they have to be fee only" lines.  I'd say in general, just avoid someone who works for an insurance firm, or someone in their first 2-4 years of the business.

I've been doing this for 18 years, I'm not a CFP but I'm confident I could pass the test. I don't have a bachelors degree, so I can't take the CFP test.  Also there are many commisionable products that are a better fit than a fee product, so "fee only" is not a live or die statement to look for...

Dan H. · Answer

Financial rules are complex, large, and constantly in fluctuation.

A financial expert to advise you n financial matters is highly beneficial whether it t is a CFA, CPA, tax expert

If you portfolio has some worth most brokerages will provide one (or two) for free.  I have 2 CFP and run their advice by my tax man.

I do not view the financial advisor’s primary role as picking your investments even though one of mine does and has far outperformed the market over the last 24 years.

I view it for insight into financial Decisions. How many non financial Pros know what a NUA is?   Know when it is beneficial to transfer traditional Roth/401k to Roth?   Know the STR “loophole”.  Know the requirements and benefits of being a REP?  Know the benefits of cost segregation and why it could greatly accelerate the return on properties if the resulting savings is applied as a discount on the property.  For example my last purchase had year 1 tax savings of $174k.   If I subtract this $174k off my investment amount (down and closing) , the investment base amount is reduced significantly resulting in increased return.   If the down was $460k but the purchase results in $174k of savings that would not have occurred without the purchase, the in effect down is $460k minus $174k or $286k.

A good financial advisor, which does not necessarily need to be a CFA, will easily be worth their fee especially since if the brokerage is paying their fee

Good luck

Worth it to hire a financial advisor?

Most Popular Reply