It’s not unreasonable to want to make good financial investments, but you might be wondering if you can invest without a financial advisor. Managing your money with a strong investment strategy is certainly doable, but there are some things you should keep in mind.
Frequently, you need to have a minimum amount of investable assets before a top-tier financial advisor will take you on as a client. That seems harsh, but financial advisors adhering to the fiduciary standard often set a percentage of your invested assets as their fee. If you don’t have a hefty amount of investable assets, the financial advisor won’t make enough from your account to stay in business.
That means there are many people who need a financial advisor and would benefit from the advice of a top-tier financial advisor, but aren't able to get it. If that describes you, here are some tips to help you work your way toward working with a financial advisor.
You can still invest without a financial planner, but you need to do a lot of independent research.
The first step is to understand not everyone is out to help you. There are many common sources of financial wisdom, from brokerage firms to social media. But there are two main problems with these sources.
First, you must learn, largely on your own, the difference between good and bad advice, usually without the depth of financial understanding to properly evaluate it! Second, there’s often little to no gatekeeping for the people giving that advice.
Some social media influencers routinely give terrible advice such as claiming that 0% loans aren’t really debt. Even advisors working at mass-market brokerage firms are prone to give less-than-stellar advice. Why? Because they’re incentivized to sell products that make their firms money, whether or not those products will yield results for the client.
A client making $40,000 per year has less ability to put money away than one making six figures, which means their advisors need to make more per transaction in order to pay their own bills. They may end up using expensive products with high commissions and fees, creating a cycle that’s very difficult to get out of.
To put it simply, there is a lot of groundwork that needs to be done if you want to invest without a financial advisor.
I’ve got a list of things to think about when you’re managing your own financial planning:
Throw out the old rules!
For about twelve years, the United States had the best economy the world has ever seen. Markets soared, and it was almost child’s play to make money by investing. But that’s all changed. The coronavirus pandemic, Russia’s invasion of Ukraine and global supply chain issues have conspired to make success in the markets much more challenging.
Even so-called “safe” investments like government bonds are performing poorly now. We’re in much more treacherous waters than we’ve been in since the ‘80s, and even the safe harbors have storms.
Carefully consider your sources of information.
There’s a lot of free financial advice out there. Some of it is good, but a lot of it isn’t. Research the places you’re getting information from. Make sure they don’t have a reputation for giving bad advice.
A little knowledge can be dangerous.
One aspect of human behavior that’s common enough to have a name is the Dunning-Kruger effect, which says we often know just enough about a subject to not understand how little we know about it. A lot of people want to be financially savvy but don’t learn enough about finance before they start acting on what they think they know.
A great example is cryptocurrencies. People invested a lot of money in them and saw tremendous growth until they suddenly didn’t. When the crypto market crashed, it caught a lot of people by surprise because they didn’t understand market risk as well as they thought they did.
If you don’t have a financial advisor, that doesn’t mean you should never invest in anything. But it does mean you need to be particularly dedicated to learning all you can about financial planning and especially vigilant against falling into the trap of thinking you know more than you know.
Who Needs a Financial Advisor?
While it is entirely possible to invest without a financial advisor, sometimes you need expert guidance. These cases are when you need a financial advisor.
Whether you're a recent graduate, a new business owner, or looking to save for retirement, a financial advisor can provide personalized advice tailored to your needs and goals. They can help you create and adhere to a budget, understand investment options, manage taxes, and more. If you can invest without a financial advisor, then be wary of the risks.
If any of the following describe you, it probably means a financial advisor can help.
You Don’t Have Much Advanced Financial Knowledge
Having a financial advisor can be invaluable for those with limited financial knowledge or experience. A financial advisor can help educate and guide individuals in making informed decisions about their finances, retirement plans, investment portfolios, and financial situation, helping them to make the most of their money and achieve their financial goals.
You Are Preparing for Retirement
Life during retirement years can be financially challenging if there is no proper plan. That’s why you need a financial advisor to help create, manage, and sustain a comfortable retirement lifestyle.
They can provide guidance on investments and savings that can be used to ensure a secure future for those approaching or in retirement. With the assistance of a certified financial planner, retirees can plan for their future and have peace of mind knowing that their finances are in good hands.
You Are a Busy Professional with Limited Time
Having a demanding career or business can make it difficult for you to manage your finances optimally. That is when you need a financial advisor to help you manage your investments, financial planning, and other important matters.
This can help you to free up your time and energy to focus on your career. You can find a financial advisor that aligns with your goals and can give you the tailored advice you need.
You Have a Complex Financial Situation
People with multiple income sources, investments, or significant assets can benefit significantly from engaging a financial advisor. You need a financial advisor who can help you manage and optimize your portfolio, giving you the knowledge and confidence to make informed decisions about where to allocate your resources for maximum returns. With the right financial guidance, you can achieve your long-term goals with greater ease and efficiency.
You Have a High-Net Worth
High-net-worth individuals have unique financial needs and require specialized advice to ensure their wealth is managed responsibly and efficiently.
You will need financial advisors who can provide tailored advice and guidance on various topics, including tax planning, estate planning, and wealth management. High-net-worth individuals can protect their assets while also taking advantage of available opportunities to maximize their wealth.
Choosing the Best Path for Your Financial Situation
If you choose to invest without a financial advisor, be sure to do your due diligence. A lot of resources on the internet aren’t factual or are misrepresented. If you choose to go this route, be prepared to do a lot of independent research.
After looking at your financial situation, if you decide that you need a financial advisor, there are some things you should look for. First of all, find a fiduciary — a professional with a legal obligation to manage your finances for your benefit, not their own.
You should also choose a financial advisor who is willing to be flexible and objective with your finances. We offer a wide range of services at Asset Preservation Wealth & Tax.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.