Do I Need a Financial Advisor?
One of the biggest money questions I hear all the time is: “Do I really need a financial advisor?”
And honestly? My answer is: it depends.
Over the past 50 years, the stock market has become incredibly efficient, accessible and more easily navigated for the individual investor despite their background knowledge of the stock market.
There are big brokerage firms like Fidelity, Vanguard, Merrill Edge and Charles Schwab (to name a few) where you can actively manage (buy and sell) your own investments.
There are also Robo-Advisors, like Betterment, Wealthfront, Ellevest and Vanguard Digital Advisor that create an automated investment strategy for you based on your time horizon, risk tolerance and long term goals.
With apps, online tools, and endless financial info at our fingertips, it has never been easier to start investing or managing your own money. A few clicks and taps, and you can open an account, transfer funds, and buy investments in thirty minutes or less. Sounds amazing, right?
So why would anyone need an advisor? Well, personal finance isn’t just about picking a stock or opening a Roth IRA, it’s about your whole financial life and how all the pieces fit holistically together. And depending on where you are right now, an advisor may (or may not) be worth it.
Why Some People Don’t Need a Financial Advisor
Whether or not you need an advisor really comes down to your current life stage, goals, responsibilities, and how much you want to manage yourself.
You might not need ongoing guidance if:
- Most of your wealth is in your 401K or employer provided retirement plan, and you’re comfortable choosing your investments.
- You only have a small amount of extra savings to invest.
- You don’t have major responsibilities (like kids, a business, or big assets to manage)
- You want to learn personal finance, handle budgeting, debt payoff, and basic investing yourself.
In these cases, a brokerage account at Fidelity, Vanguard, or Schwab or a robo-advisor like Betterment or Ellevest might be all you need. If you’re looking for more strategic planning and you want to manage your investments yourself, then check out a financial planner. Or if you just want clarity on budgeting or debt, a one time session with a financial coach could make more sense than paying an ongoing advisor fee. Tune into my blog post here about what the differences are in financial advice!
When a Financial Advisor IS Worth It
Now, here’s where things start to shift. A financial advisor becomes increasingly valuable when your financial world gets more complicated or when you simply don’t want the stress of managing it yourself.
Here are situations where an advisor is absolutely worth considering:
Life Changing Events
If any of the below life altering events happen in your life and you have found yourself in a position where your wealth is increasing substantially and you now have the responsibility to manage wealth that you have not had to before, please consider discussing with a financial advisor.
- Death in the family resulting in a transfer of wealth
- Divorce leading to asset splits
- A large liquidity event coming up (like selling a business or receiving an inheritance)
You Have a More Complex Financial Situation
- Managing all your wealth has become almost a full time job
- You want guidance on tax optimization, retirement planning, saving for children, or insurance coverage
- You want to plan for wealth transfers to the next generation
- Your net worth includes multiple components, investments, or business interests that require attention and planning for.
Feeling Overwhelmed
Investing, managing money, and taking ownership of your assets can feel daunting, stressful, and sometimes so overwhelming that doing nothing feels easier. But here’s the truth: doing nothing isn’t an option.
If you’re not ready or able to educate yourself and actively make decisions, that’s okay. Everyone’s comfort level with finances are different. The key is knowing when to get professional guidance so you can make smart decisions and set yourself up for success.
You Just Don’t Want to Do It Yourself or Don’t Have the Time To
Maybe you could manage your finances, but you don’t want to spend your time on it. You’re busy, or retired, or simply don’t enjoy managing money. That’s perfectly okay, and a financial advisor can handle the time and energy component for you.
Not Everyone Needs an Advisor…But Most Everyone Needs a Planner
Here’s the distinction: not all financial advisors act as planners, and not all planners manage investments. The biggest difference is that one manages your investments and the other focuses on the strategic picture of your money.
Your ideal advisor should be, at a minimum, a planner. You don’t want someone making a few small investment changes once or twice a year and ignoring the bigger, arguably more important, pieces of your financial life:
- Are you on track for retirement?
- Is your insurance coverage adequate?
- Should you pay down debt or invest more?
- How should you save for your kids’ education?
- Are your assets protected?
- Are your financial decisions aligned with your life goals?
This is exactly why, in Part 2: Financial Advisor vs. Financial Planner vs. CPA vs. Coach, I break down the roles, typical payment structures, and who each is best suited for. And in Part 4 and Part 5, we cover what to look for in a financial advisor and the five questions to ask before hiring.
Next Steps
If you’re curious about whether you need a financial advisor, the type you should hire, and how to make the best choice for your life:
- What Is a Financial Advisor?
- Financial Advisor vs. Financial Planner vs. CPA vs. Coach: What’s the Difference?
- Do I Need a Financial Advisor?
- What to Look For in a Financial Advisor or Planner
- 5 Questions to Ask a Financial Advisor Before Hiring
And if you want a personal roadmap to see how an advisor (or planner) could help you today and tomorrow, you can always schedule a 1:1 with me. Let’s get you set up to take control of your financial life with confidence.
