Should I use a financial advisor or do it myself?

November 28, 2019 Should I use a financial advisor or do it myself?

This week I’m going to answer what is perhaps the number question people ask when it comes to financial advice. Drum roll, please…

Should I use a financial advisor or do it myself?

It’s a big one. The million-dollar question, if you will. 

Before I get down into the detail of the pros and cons each way, I’d like to preface it by saying that we actually cater for both scenarios.

If you need a seasoned financial advisor who’ll take care of everything for you, cool, we can do that.

If you fancy doing it all yourself and need an ongoing financial mentor and soundboard, we do precisely that for a number of Orange Wealth members. 

Back to the question, though. First, I’ll give you the top-line answer. Are you ready? Here it is – it depends. 

 

Financial advice isn’t rocket science.

If you’re great at tracking your spending, saving and investing, and you’re managing all the debt you’re carrying and on top of it all, it’s highly likely you’d have the focus and diligence to serve as your own financial advisor.

If you’re not, then I’d argue you probably need some help. 

As a starting point, there are three big questions you need to answer (and it’s important to be super realistic here) before working out whether you should use a financial advisor or, hey, do I do it myself…

• Do you have the time and, perhaps more importantly, how much is your time worth?
• Do you actually need comprehensive financial planning?
• Can you emotionally detach yourself when making big decisions about money?

How you answer these three questions will give you a pretty clear indication as to which path you should go down. 

Now, let’s breakdown the pros and cons of seeking out the help of a financial advisor versus becoming a do-it-yourselfer financial advisor. I’ll start with the former, given that’s what we do…

The financial advisor route

You no doubt already know this, but, just for context, a financial advisor is a professional you pay to provide financial advice and management for a set fee or a percentage of the assets they manage for you.

They also act as an ongoing partner to help you navigate complex financial situations and be hand to answer any questions you may have along the way. Make sense? Cool.

 

Key considerations

• Choosing the right financial advisor is something only you can do for yourself. 
• There are plenty of cowboys around, so you’ll need to do your own research and due diligence.
• Word of mouth is always a big one – engaging a financial advisor whose friends, family or friends of friends have achieved great results with is a huge plus in my books. 

 

Pros

• The financial advice process is one where they should do the lion share of the work for you, which is great if you don’t have time to do everything yourself.
• Advice is tailored specifically to your unique financial situation
• They’ll help you be much more objective and less subjective 
• There’s a certain peace of mind knowing that you have a seasoned financial expert guiding and managing you and your money to help you get the point of true financial independence
• They’re particularly good for helping you deal with more complex financial situations
• On average, do-it-yourselfers often struggle to beat the returns of a professional financial advisor, bearing in mind that it’s a long game

 

Cons

• As with any professional service, advice and management come at a cost, which, with the right advisor, is negligible when viewed against the medium- to long-term gains you’ll make off the back of their advice. 
• I’ll be honest, off the back of the Royal Commission, the industry’s name has been dragged through the mud a little.  As with any industry, there are always cowboys who give others a bad name. 
• Be prepared to change your habits around money – a good financial advisor will really force you to think long and hard about what’s important in your life and help you make better decisions with your finances (not really a ‘con’, I know, but it can be a bit of a negative for some people).  

 

The DIY financial advisor route

Thanks to the wealth of information (pardon the pun) on the Internet, there’s never been a better time to become your own financial advisor.

If you have the time, that is. Time aside, it takes serious discipline, which can be difficult for some. 

 

Key considerations

• If you’re not well versed already, be prepared to do a lot of research, reading and thinking to get up to speed so that you can make educated decisions. This will give you a fighting chance. 
• Start with the basics of sorting out your finances here and now. 
• You really need to think about where you want to be in 10, 20 or 30 years time and work backwards from there. 
• Be prepared that, even with the plethora of info at your fingertips, that there are going to be times where you’re gonna need help. Whether that’s a fellow do-it-yourselfer or reaching outro someone like us. 

 

Pros

•  It’s a great opportunity to learn one of life’s most important skill sets – money management. Better still, you get to put that learning into regular, systematic practice, which is invaluable. 
•  There’s a perceived saving on fees and various costs associated with financial advice.
•  You’ll dictate and guide a clear-cut, objective roadmap to reach your life and financial goals, which can be really empowering.
•  You don’t have to do it all alone – there are plenty of DIY communities you can lean on as you go, or, again, as many of our members do, we can mentor and guide you along the way if that’s a path you want to go down. 

 

Cons

• It’s going to be time-consuming. And then some. What’s more, if you’re not systematically reviewing your financial situation on top of all that, you’re not doing it properly. 
• Did I mention time? I’ll say it again, time’s a big one.  As I mentioned before, you really need to weigh up how much your time’s worth, particularly if you have a family, kids and career or business to deal with at the same time. 
• You’re going to have to make big financial decisions at different stages, and you’ll need to do it divorced of emotion, fear and greed (money’s one of the biggest drivers of emotion remember; we’re often our own worst enemies when it comes to emotion and money). 
• Whether you’re considering engaging a financial advisor or thinking of going down the DIY route, we’re always happy to lend an ear and help you work out which is the best way to go.

   

   Feel free to book in a coffee below. 

Disclaimer: All information contained within this article is of a general nature. It does not take into consideration your personal financial circumstances. Please consult a professional financial adviser (just like us ) when making a financial decision.