You don’t need a financial advisor — there, we said it. While there are certainly benefits to working with a financial advisor to invest your money, you can absolutely save yourself the fees and do it on your own. And, no, despite the potentially intimidating financial jargon, we promise it’s not all that complicated. Whether you’re a total newbie to the investing world or you’re a seasoned veteran, you are more than capable of investing for yourself.
What are the benefits of using a financial advisor?
It’s no secret that there are plenty of advantages to using a financial advisor. After all, working with a financial advisor can give you peace of mind knowing that your investments are in the hands of an experienced professional.
Here are some of the major reasons why investors choose to work with advisors:
- Financial advisors are certified professionals who often have years of experience in their field. Those who’ve advised clients for decades have likely been through various cycles of bull-and-bear markets. In other words, they know the market well, and their experience can save you time studying up yourself.
- Financial advisors do the management work for you. If you don’t have enough hours in your day to structure and manage your portfolios — and then to track their performances — it’s part of an advisor’s job to do just that.
- Financial advisors are humans. This means that you have someone to whom you can refer when you have investment questions or concerns. This could mean that you get a rather supported, personalized experience. Working with another person may also help to hold you accountable in sticking to your investment plan.
That all said, you don’t need a financial advisor.
What are the cons of using a financial advisor?
While financial advisors provide plenty of perks, they’re not entirely necessary. Here’s why you actually don’t need one.
1. They are costly.
Financial advisors don’t come cheap. Most advisors take a hefty percentage of your money as a fee for their services. Many will charge about one to two percent. You may also pay an hourly fee of anywhere between $100 and $300 for their time if you’re regularly meeting with them. And, then, of course, there can be hidden fees in certain funds in which they may place your money.
2. Finding the right one for you takes time.
Delegating your finances to a professional may feel like a huge relief. But it’s important that you hire the right professional to handle your investments, and finding the right financial advisor for you is not necessarily an easy feat. You’ll want to make sure that your financial advisor has your best interest and investment goals in mind. For example, you don’t want them selecting sub-par strategies just because of pressure from their firm or convincing you out of building wealth with assets outside of their management realm.
In order to confirm that they’re indeed looking out for you, you’ll have to know enough about investing yourself. In other words, while hiring a financial advisor may save you time managing your investments, you’ll still want to develop your own investing skills to understand their methods, monitor your portfolio’s performance and compare your success with your financial advisor against relevant benchmarks. So investing takes time, period. But there are tools out there to help you do it without the hassle of hunting down a trusted advisor.
3. They are outdated.
Sure, financial advisors can talk to you about your investment goals, risk tolerance and suitable investing strategies but, today, advanced technology can do just the same. Nowadays, there are apps that function like pocket-sized financial advisors so you can invest like a professional from your fingertips.
Q.ai, for example, uses sophisticated AI and big data to customize and automate your portfolio to adapt to fickle market conditions based on your personal risk tolerance. You don’t need to take any time out of your day to sit down with a financial advisor and discuss your goals, questions or concerns. You need merely to fill out a profile and let Q.ai’s advanced algos do the legwork for you.
4. You lose control over your money when you give it to a financial advisor.
Delegating your investments to an advisor may be a weight off your shoulders but, when you hand over responsibilities, you also hand over control. Sure, this is dangerous for obvious reasons: Some financial advisors don’t care so much about what happens to your money once they have secured your business. But, even with the best financial advisors, forking over control of your financial future is a risk.
At the end of the day, you’re the one who best understands your investment goals. Why give someone else the power to dictate your financial future when you can indeed do it yourself (and for cheaper)? Besides, taking control of your investments may keep you motivated to stick to your financial plan.
There are certainly benefits to using a financial advisor but, when you look at the tools at your disposal today, you don’t need one (and you may not actually want one!). Before handing over your investments to an advisor, consider trying your hand at it first. You’d be surprised by just how successful you can be when you take control of your own financial future.