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There’s no doubt that working with a financial advisor can be helpful to some, even those who are experienced investors. “The financial markets change by the second, new products are available each day and regulations adjust frequently — it can be helpful to work with an advisor to ensure you are up to speed,” says Tiffany Lam-Balfour, investing spokesperson for NerdWallet, who adds that even seasoned investors often want someone whom they can bounce ideas off and help them make informed investment decisions. (Use this tool to get matched with a planner who meets your needs.)
But you’ll pay for that advice. Many financial advisors charge a fee based on how much money they manage for you, often ranging from 0.25% to 1% of assets under management per year; others charge hourly fees. In both cases these can add up, and while they are worth it to many people, for some people, they are not. Here’s who likely doesn’t need a financial advisor.
Money doesn’t stress you out much
Those who are constantly stressed about money have the most to gain working with an advisor, says R.J. Weiss, founder of the personal finance site The Ways to Wealth — indeed a financial advisor’s fee can be worth it if it keeps you from panicking about money all the time. “A common misbelief is that only high-net worth individuals should seek an advisor. Yet, with so many affordable options today, what’s far more important than net worth is the level of stress someone has with money,” says Weiss. (Use this tool to get matched with a planner who meets your needs.)
You’re already managing your money successfully
Weiss notes that our past behaviors can tell us a lot about whether we need an advisor or not. “Someone who has spent time in the past educating themselves about personal finance is more likely to do it in the future,” he explains. So if you’re someone who has been up on the latest with money, and how best to manage it, this is a good indication you might be able to do it alone. And, he adds: “When someone is considering working with a financial advisor, it’s important to look at what behaviors lead them to where they’re at currently. If they’re confident they’ve done a good job themselves [in the past] and don’t find themselves stressed, a DIY approach is likely best.”
You don’t panic in a crisis
If you’re the kind of person who sees markets go down and immediately thinks he needs to park all his money under his mattress, a financial advisor may be able to provide a calming influence that can save you money. Grace S. Yung, a financial planner at Midtown Financial Group, notes that many times “ people who panic when the market pulls back are folks who don’t have a plan and are therefore reactive and make knee-jerk decisions.” That’s one of the key things a financial advisor can do for you: make a plan that can account for volatility, and then help you calmly adjust it according to life goals.
