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Is It Worth Hiring a Financial Advisor?

Dan Westfall

Dan Westfall

Is It Worth Hiring a Financial Advisor

Is It Worth Hiring a Financial Advisor?

As a financial advisor, you would assume I’m bias to the question: Is it worth hiring a financial advisor? And, in general, my answer would be yes. However, it ultimately depends on what you’re trying to accomplish and what services that financial advisor offers.  

The most common reason people hire me is to manage their investment portfolios, whether that’s an IRA/Roth IRA or a Taxable investment account. As a client, you should have a basic understanding of what the financial advisor is doing behind the scenes, if they’re managing your investments.

Questions To Ask When Hiring a Financial Advisor

Questions To Ask When Hiring a Financial AdvisorThere are a number of questions to ask when hiring a financial advisor. Here are some essential and simple questions to ask:

  • Are they actively managing the money or passively managing the money?
  • Are they actively managing your money and what does that mean?
  • Are they making trades every day, week, month, or quarter?
  • Are they simply rebalancing the group of mutual funds, ETFs, or index funds?

 

All of those questions are to get at the real question which is: Is it worth paying a financial advisor? If you can do it yourself by investing in basic index fund (i.e., S&P 500 index or NASDAQ 100), why pay a financial advisor 1-2% of your money?

Managing An Investment Portfolio

If that financial advisor isn’t adding any value to your portfolio through actively managing the money better than a basic index or only doing basic rebalancing back to a set percentage of funds each quarter, then you should not hire them. Either do it yourself or find a financial advisor that actually actively manages the money. Investing money in an index fund or rebalancing back to a set portfolio is something you can do on your own. With 5 minutes of research, you can learn the process of rebalancing and picking index funds.

The value of a good financial advisor is more than simply managing the investment portfolio. A valuable advisor will help with financial planning related concerns as well as the emotional part of investing such as staying the course with an investment plan in a wild stock market like what we’ve seen so far in 2022.

How To Hire a Financial Advisor

How To Hire a Financial AdvisorTo recap, first establish what you’re trying to accomplish. This way you can then match that to the right financial advisor or realize you can do it yourself with a little effort. Once you establish the goal, make a plan – whether you do it on your own or with a financial advisor that is going to implement and continually manage the plan.

Last and most importantly, stick to the plan! The economy and stock market are always going through cycles of ups and downs. Don’t allow emotions to affect the plan that you’ve implemented for yourself or had a financial advisor implement for you.

Time In The Stock Market

Drops in an account because of stocks dropping isn’t a reason to overhaul an investment plan. Stocks don’t go straight up. Every investor should understand that. Remember, when stocks are dropping and people are selling, there is someone on the other end of that trade buying. The Rich become and stay rich for a reason. This is because, as a whole, they are the people buying when shit hits the fan and stocks drop off. Henry Ford had a great quote:

“Stocks always find their way back to their rightful owner.”

Keep that in mind when you’re thinking about deviating from the plan because of stocks going down. It’s not about timing the market. It’s about TIME IN the market.

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