This may seem really weird coming from me, but the truth is you might not need a financial advisor. Not everyone does. And some people would be far better off with no advisor rather than with the advisor they currently have. Let me share a couple of real stories to illustrate the point.
When You Don’t Need A Financial Advisor – A Real Example
Rosy a nice young lady called a few days ago because she wanted to hire an advisor. She’s put together $16,000 since she graduated college last year and she is completely debt free. Outstanding job.
She’s currently single, loves her stable job and has no plans to make any big changes in her life. Does she need someone to advise her? No way. It would be a waste of her time and money at this point. She’s got spending under control and she is faithfully saving every month.
Rosy did have one question however. She wanted to know what kind of retirement plan to set up since her employer didn’t offer anything. I gave her a few ideas but suggested that she speak with her tax preparer for a definitive answer.
What about investing for Rosy?
Rosy isn’t ready to invest. She told me she wanted to save up $25,000 as an emergency fund before she invested. That might be a little overkill but it’s not unreasonable. And she’s $9,000 short of her goal. I gave her the Pilgrim Blessing and told her to call back once she reached her savings goal. I also gave her a couple of suggestions on how to invest the retirement money.
Don’t get me wrong. Rosy is a prime example of someone who will benefit by using an advisor down the road. She is smart, focused and disciplined. She’s an impressive young lady. But she already knows what she needs to do. Why hire me or anyone else to build her a plan? She shouldn’t. The risk/reward ratio just isn’t there.
Do You Need To Hire An Adivor?
If you are in a situation where your assets are modest and need to either get out of debt or build up your emergency fund, you already have your plan. Just go out and do it. Don’t waste money on someone to tell you something you already know. Capishe?
When No Advisor Would Be Better Than Your Existing One – Another Real Life Story
I received an email last week from a physician who asked about whole vs term life. His advisor sold him the whole life policy several years ago and the good doctor was concerned. After we spoke, he figured out that over 20 years the return on the whole life policy was less than 1% per year.
He wanted to cancel it (good) and shovel those premiums towards an annuity instead (not so good). When I asked him why he wanted to fund the annuity he told me that the same advisor who sold him the insurance made the suggestion. This left me scratching my head. Why would you go back to a poison well for more water? Would you go back to this doctor’s advisor after he sold you that whole life insurance? I didn’t think so.
Don’t misunderstand me please. Just because someone sells you whole life doesn’t mean they are a crook. But if you determine that your advisor sold you a product that just doesn’t work, why take another chance?
In my opinion, Paul was getting terrible advice and he would have been better off with no advisor rather than taking advice from his current “professional”. My guess is that Paul made the mistake of not really knowing how different financial advisors work.
When You Are Better Off With No Advisor Vs. The Advisor You Currently Have
If you question the appropriateness of some of the advice you’ve received lately, check it out. Get a second and third opinion. Obviously the people you talk to will have agendas of their own, but trust your gut. If you learn that your instincts were right and that your current advisor shouldn’t be in your life fire that person post haste. No advice is better than bad advice if you ask me.
You have plenty of time to determine if you need to hire someone else or if you should go it alone.
Having the right financial advisor on your team can create a lot of value. But you may not need an advisor right now. And you may be better off with no advisor rather than the one you have presently.
Do you need a financial advisor? Why or why not?
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