You have money, and no matter how hard you try, you aren’t adept at managing it. Building retirement and savings accounts, paying taxes, paying rent and utilities, investing your money wisely — none of these activities come naturally to you, so you are considering hiring a professional financial advisor to give you guidance.
But, are financial advisors worth it? Here are some pros and cons with regards to hiring financial professionals, and why you might benefit more by investing in your own financial literacy.
Pro: Financial Advisors Have Experience and Education
Given that you are reading this article, it seems unlikely that you pursued a finance-related education or have spent much time in a finance-related field. As a result, financial advisers are almost guaranteed to be better educated in the field or at least have more experience working with financial matters than you have, so when you hire an advisor to manage your money, you are likely to get good advice from someone who knows what they are talking about.
Con: You Won’t Gain Self-sufficiency or Self-satisfaction
The more you lean on a financial advisor, the less capable you will be of managing your money yourself. Personal finance is a skill that grows over time; by investing energy into learning about your finances, gaining proficiency with money management tools, and experimenting with different management styles, you will improve your knowledge and skill. Not only does this give you greater self-sufficiency, but it allows you to feel fulfilled by your effort. Typically, hiring someone to do the job for you simply doesn’t provide the same feeling of satisfaction that working hard at something yourself.
Pro: Using a Financial Advisor Will Save You Time
It takes time to gain knowledge and skill — time you might not have available. If your job requires a significant amount of hours out of your week, and/or if you have other responsibilities, like family, you might not want to devote any amount of your precious time to learn about your finances. Outsourcing to a professional tends to be faster and easier because it frees up your schedule for other pressing issues at work or at home.
Con: Financial Advisors Don’t Come Cheap
Unfortunately, saving time comes at a cost. Most financial advisors demand a fee of between 1 and 2 percent, and some of the funds they use to grow your money also have associated fees of between .5 and 2 percent. If you only have a small amount of money to manage, a significant portion of your earnings could be eaten up by these fees. In truth, it makes sense to use a financial advisor only when you are working with a sizable amount of money and when you have cash to spare; otherwise, you will likely gain more by going DIY.
Pro: Financial Advisors Can Bring Peace of Mind
Because financial advisors have more experience, because you can outsource money management to them and devote more of your time to things that matter more, you have a better chance at developing a peaceful state of being by hiring a financial advisor — especially if you have the cash to spare. Life is chaotic, and financial matters are complicated and stressful; by hiring a professional, you pass a small amount of accountability for your financial balance onto someone else, helping you to relax and find greater enjoyment in your wealth and success.
Con: Qualified Advisors Are Hard to Find
Yet, you will only gain peace of mind if you find a financial advisor you can trust, which is a bit easier said than done. Not all professionals with “financial” in their name are created equal; they need to be registered with the Securities and Exchange Commission and carry certain levels of certifications to qualify for a basic level of trust, and even then, they might still act out of their own self-interest. Unless you know someone who uses a good financial advisor, you might need to spend weeks interviewing different candidates about their credentials and histories before you can settle on someone likely to work for you. Unfortunately, if you make a mistake and hire an untrustworthy financial advisor, you could lose everything.
If the decision to hire a financial advisor was easy, we would give you a straightforward answer. You need to weigh these pros and cons, considering your financial situation and financial goals, to determine whether using a financial professional is right for you.