When You Shouldn't Hire an Advisor

Matthew Gray |

Should I hire a financial advisor? 

 

Many people toss this question around, wondering if someone in their situation would benefit from the services of an advisor and, most importantly, wondering if it’s worth the price.

 

There are a lot of articles written and ads published about what type of person benefits from a financial advisor. I’m sure they include a lot of helpful information, but I’ve decided to approach this question from a different angle. 

 

Who should not hire a financial advisor? 

 

While I believe anyone would benefit from one free meeting with a financial planner to get some pointers, there are some situations where hiring an advisor may not be in your best interest. 

 

Here are the scenarios that come to mind based on my experience. 

 

  1. You are already very confident in your financial future

 

In this situation, you enjoy planning around your finances and keep track of everything yourself. You have run retirement projections on your own and don’t see any reason why your future isn’t secure. You may benefit from getting a few ideas, or having someone put a second pair of eyes on your calculations, but for the most part you are a do-it-yourselfer and have it under control.

 

  1. You are just getting started in your career and don’t have any disposable income to save

 

Young professionals can often be great candidates for financial planning. However, if you are just starting your career, and your income only covers your expenses and debt payments, you shouldn’t be engaging with a planner just yet. This usually changes for folks once their household income is above $100,000. Again, an initial meeting to set some goals could be helpful, but you don’t need to hire an advisor. 

 

*An exception would be someone like a doctor or dentist, who may start with both a really high income and a giant debt load and can benefit from discussing how to balance it all*

 

  1. Someone who is extremely risk-averse, and wants nothing to do with the stock market

 

The stock market can be extremely volatile and steps should be taken to make sure you are in a portfolio that manages your risk appropriately. That being said, some people have been burned by the market or can’t tolerate any risk at all. These folks should be especially wary of working with advisors, as they likely will get catered products which can be very expensive and tie up your money for long periods of time. Keep in mind, if your savings all stay in cash or something similar, inflation can be a real threat to your future.

 

*Some exceptions may include people who invest heavily in real estate or own a business, as these other types of investments can benefit significantly from planning conversations*

 

  1. You don’t want to meet regularly

 

Proper financial planning involves staying in communication with your advisor and addressing changes in your life as they come along. As a rule of thumb, you should meet with your planner at least once or twice a year to stay on track. If you would rather give someone a chunk of money to manage and not talk again for a few years, you are better off doing it yourself or finding an inexpensive online platform. 

 

  1. You like to move your money in and out of the stock market

 

When the stock market turns down, people often get nervous and feel the need to make a change. This is where most big mistakes happen. If you are someone who pulls your money out of the market whenever you have a hunch things are about to turn south, you likely won’t benefit enough from planning to make it worth your while. Effective financial planning depends on being able to formulate actions and strategies in advance. For a person who wants to make investment decisions on the fly based on intuition, working with an advisor really doesn’t make sense.  

 

*Note: Making plans for what you will do if the market were to take a large dive and then sticking with the plan is different from pulling money in and out based on a premonition*

 

While I’m sure there are more situations where hiring a planner doesn’t make sense, I hope you found these five tips helpful. 

 

If you aren’t sure if financial planning is right for you, a free initial consultation is helpful in providing some clarity. I’d be honored to have a conversation with you about it. You can schedule a time to talk with me by clicking here.