At some point, you will wonder: should I hire a financial advisor? The financial services industry would love your business, but the truth is more nuanced. Sometimes advisors are worth every penny. Sometimes they are an expensive mistake.
The Case for DIY Investing
For most people in the early wealth-building stages, DIY investing is not just adequate—it is often better.
Why DIY Works
- Simple portfolios perform well — A few beats most professional strategies
- Low costs compound — Advisor fees of 1%+ dramatically reduce long-term returns
- You learn by doing — Managing your own money builds financial literacy
- Your situation is straightforward — Single income, standard accounts, basic goals
The math is brutal: If you invest $500/month for 30 years at 7% returns, you accumulate $567,000. With a 1% advisor fee (reducing returns to 6%), you get $474,000. That is $93,000 lost to fees.
When DIY Makes Sense
- Your financial situation is relatively simple
- You are willing to spend a few hours learning
- You can stick to a plan without emotional decisions
- Your needs are covered by basic accounts (401(k), IRA, taxable brokerage)
Types of Financial Advisors
Not all advisors are created equal. Understanding the types helps you choose wisely.
Fee-Only Fiduciary Advisors
- How they are paid: Flat fee, hourly rate, or percentage of assets
- Fiduciary duty: Legally required to act in your best interest
- Conflicts: Minimal—they do not earn commissions on products
Do This
If you hire an advisor, choose a fee-only fiduciary. This eliminates most conflicts of interest. Ask directly: "Are you a fiduciary 100% of the time?"
Commission-Based Advisors
- How they are paid: Commissions from products they sell you
- Fiduciary duty: Often just "suitability" (must be appropriate, not necessarily best)
- Conflicts: Major—they earn more by selling expensive products
Robo-Advisors
- How they work: Algorithms manage your portfolio automatically
- Cost: 0.25-0.50% of assets (much cheaper than human advisors)
- Best for: Hands-off investors who want automated rebalancing
Fee-Only Hourly or Flat-Fee Planners
- How they work: One-time or annual checkups for a fixed price
- Cost: $200-500/hour or $1,000-3,000 for a comprehensive plan
- Best for: DIY investors who want occasional professional input
When Professional Help Is Worth It
Complex Tax Situations
If you have:
- or RSUs
- Multiple income sources
- Business ownership
- Rental properties
- conversions
A tax-focused advisor or CPA can save more than they cost.
Major Life Transitions
- Inheritance or windfall
- Divorce and asset division
- Approaching retirement
- Death of a spouse
- Selling a business
These high-stakes moments benefit from professional guidance.
Estate Planning Needs
When your grows, estate planning becomes critical:
- Trust structures
- Beneficiary optimization
- Tax-efficient wealth transfer
- Charitable giving strategies
An estate attorney and possibly a financial planner working together is valuable.
You Cannot Stay the Course
Be honest: if you panic-sold during market drops, you may need someone to talk you off the ledge. The behavioral coaching alone can be worth advisor fees.
Pro Tip
If an advisor prevents you from selling during one major market crash, they may have earned their fees for the next decade.
You Simply Do Not Want to Do It
Some people have no interest in managing money. If you hate it, will avoid it, and can afford to delegate, that is valid. Just choose a fiduciary.
Questions to Ask Any Advisor
- Are you a fiduciary? (Should be yes, always)
- How are you compensated? (Understand all fees and commissions)
- What is your investment philosophy? (Should align with evidence)
- What are your qualifications? (CFP designation is good)
- Who is your typical client? (Should match your situation)
- What services do you provide? (Investment only? Tax? Insurance? Estate?)
Red Flags to Avoid
Avoid This
Run away from any advisor who:
- Promises specific returns
- Pushes proprietary funds or products
- Is not transparent about all fees
- Discourages you from asking questions
- Creates urgency or uses fear tactics
- Cannot explain their strategy simply
The Hybrid Approach
Many people find success with a middle path:
- Manage your own investments with simple
- Hire a fee-only planner for annual or bi-annual checkups
- Use a CPA for tax preparation and planning
- Consult an estate attorney when net worth warrants it
This approach costs $500-2,000/year instead of $5,000-20,000, while still getting professional input on important decisions.
How Much Should You Pay?
Assets Under Management (AUM) Fees
- 1% is common but expensive
- 0.5% or less is reasonable for simple portfolios
- Negotiate—larger accounts should pay lower percentages
Flat or Hourly Fees
- $200-500/hour for planning
- $1,000-5,000 for comprehensive annual plans
- Often better value than AUM for most people
What You Get for the Fee
Make sure services include:
- Investment management OR oversight of your DIY approach
- Tax planning and coordination
- Insurance review
- Retirement projections
- Estate planning coordination
- Regular check-ins
Finding a Good Advisor
Resources for finding fee-only fiduciaries:
- NAPFA.org (National Association of Personal Financial Advisors)
- Garrett Planning Network (hourly planners)
- XY Planning Network (focuses on Gen X/Y clients)
- Fee Only Network
Interview at least 2-3 before deciding.
The Bottom Line
Quick Win
Before hiring an advisor, try managing your own money for a year using a simple three-fund portfolio. If you can stick to the plan through ups and downs, you may not need ongoing professional help. If you struggle, consider a fee-only fiduciary or flat-fee planner for periodic guidance.
The best advisor is one who helps you make good decisions without creating dependency. Whether that is a professional, a robo-advisor, or yourself, choose the option that leads to the best outcomes for the lowest cost.