Should You Hire a Financial Adviser?

As you start to build up your net worth, the question of whether or not you should hire a financial adviser becomes more important. However, the answer is not a simple yes or no. Some people do quite well without a financial adviser, some people need one, and on rare occasions, some wish they never had one. Even though I’m a financial adviser, I don’t believe that everyone should hire a financial adviser.

Photo by Miguel Virkkunen Carvalho via Flickr

In fact, I don’t think anyone should hire a financial adviser unless and until they can answer two questions:

    1. What do you want to get out of the relationship?
    2. Are you ready to take advice?

What do you want to get out of the relationship?

Let’s tackle the first question, what do you really want out of your relationship with a financial adviser?

This may seem like a really basic question but I think you’ll see that it really isn’t. For example, some people hire financial advisers because they want better investment results.  Fair enough…but let’s look at this issue a bit more carefully.

Do you want an adviser who will beat the market every year?

If this is your real motivation, forget about it.  It’s impossible. No financial adviser can beat the market year in year out.  If they have a great streak for a number of years, chances are they’ll disappoint you sooner or later.  And you’ll bail on them exactly when that happens.  There are investment strategies that work, but nothing works all the time.

Don’t hire an adviser for above-market performance.  It’s not something you can hang your hat on.

Are you looking to hire an adviser because you need a financial plan?

If so, you may not need a money manager.  You should just hire someone who can put a plan together for you.  A plan you’ll understand and more important, one you’ll implement.

If you need insurance, you can get that online much cheaper than through a planner or an insurance agent.

Have I discouraged you from hiring a financial adviser?

I hope not.

Good Reasons to Hire a Financial Planner

I think there are two very good reasons to hire a financial planner:

  • First, you admit that you don’t know what you don’t know and you need direction.  This would argue for hiring someone to create a financial plan.
  • Second, you need financial discipline.  You need someone to manage your money because you need to be saved from yourself.  This may sound funny but for those of you who really understand what I’m talking about, you know it’s true — and not funny at all.

If you are your own worst enemy when it comes to investing or spending, just having someone to be accountable to can be worth multiple times the price you pay. Think about the last bone-head investment you made.  What would it have been worth to you had you not done it?  Think about the money you wasted last year because nobody scrutinized your spending.  How much would you have saved had you been under the watchful eye of someone else? What is your definition of financial success?  Are you on the road to achieving it or are you derailing yourself at every turn?

So these are the two reasons why you might want to hire an adviser.

But…are you ready to take advice?

But remember…. I said before that you need to be able to answer two questions before you hire an adviser.

The second question is, are you willing to listen?

I’m serious.  Many people hire an adviser when all they really want is someone to rubber stamp their mistakes.  Be honest.  If you’re not willing to take direction, don’t bother hiring a financial adviser.  You’ll spend a lot of money for nothing and just end up with a headache.

In fact, if you are that confident in your ability, why not just learn how to become a financial planner yourself?

Do you have a financial planner?  If so, how did you know you needed to hire one?

About the Author

By , on Apr 7, 2010
Neal Frankle
Neal Frankle found himself in a financially fragile situation at the age of 17. Both his parents passed away while he was still in high school, leaving behind a small insurance settlement. Neal sought out a financial advisor to help him invest his nest egg so that it would help put him through college. Instead, the advisor charted a self-serving course and was on the verge of burning through the money when Neal realized what was happened and fired him just in time to avoid losing everything. The experience had a deep impact on Neal and formed in him a lifelong desire to help people learn to make smart financial decisions. Today, with more than twenty-five years of experience in the financial services industry, Neal is an author and avid blogger. To learn more, visit Wealth Pilgrim.

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Leave Your Comment (6 Comments)

  1. Joseph says:

    Hi Michele! Send me an email at sjcammayo@yahoo.com and I will help you find a good fee based financial advisor.

  2. Michele says:

    HI, thanks for all the info. I have been trying to find a good fee based financial advisor, and that is a little tough to do! Most financial professionals want to manage your money, and assure you they are the best. Any tips on how to locate and find the better fee based advisors? What questions to ask them, etc? thanks!

  3. James says:

    i am not sure i am ready to take anyone’s advice but i feel i am ready to at least sit down and talk to someone who might be able to help me with a plan or point me in some sort of direction. thanks for the advice

  4. Jersey Mom says:

    I use a financial advisor. After college, I began saving and investing. A good friend recommended someone she knew. Even though I’m much more knowledgeable now regarding PF and how to invest, I still use her. We have a great relationship!

    Many of the millionaires I know use financial advisors. It’s not just for people who don’t know how to handle money.

  5. Pinyo says:

    @Kristine, thank you for sharing your positive experience with us.

  6. Kristine says:

    We have a financial adviser. We never thought about having one before, but my brother-in-law recommended him to us.

    All in all, it has been a great relationship. He is a LEAP agent and works on our macro-financial situation from insurance to helping us with investments to helping us find resources for estate planning.

    We are in a great financial situation with all the advice he’s given.

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