"Why should I pay you when I don't pay anything at [insert online broker name here]?"
-- Reluctant Prospective Client
We live in an age of self-service.
We ring up our own groceries, do our own taxes, shop for our own insurance, book our own vacations, and invest our own savings.
The innovations that allow us to do these things have led to lower costs for providers and consumers, making these goods and services cheaper to consume and thus more widely available.
I believe that this is a good thing.
So why would a Financial Advisor who clearly charges for her services be praising the democratization of these same services? Why would I laud the very thing that leads to "fee compression?" Why would I cheer on my competition?
Because wider access to goods and services is good for everyone.
And because not everyone needs a Financial Advisor.
I've seen enough successful do-it-yourself investors to know this.
And yet, I am a highly successful Advisor who adds new clients to her book of business each year. I see my Baird colleagues doing the same.
So, what gives? Why pay when low-cost providers abound?
Complexity Demands Expertise
For a very long time, I shopped for insurance on my own. I was a renter with few assets and simple needs. There was no good reason for me to work with a dedicated insurance broker.
That all changed when I bought my house.
I was now going to be responsible for a highly valued asset with a large mortgage, and I could be held liable for anything that might happen on that property.
Even though I'm licensed to sell insurance and have studied Property and Casualty Insurance as part of my training to become a CERTIFIED FINANCIAL PLANNER™ Professional, I recognize that my knowledge of (and interest in) the minutia of P&C Insurance is limited.
So, I hired a broker.
She used her expertise and knowledge to craft the right mix of coverages so that I had exactly what I needed, understood what my coverage was, and had the confidence that I hadn't left any blind spots.
I may have paid a bit more in premiums, but I also got the comfort of knowing an expert was helping me navigate a complex topic.
Behavior Is Key
If you've ever tried to diet or start a new exercise plan, you know that managing your own behaviors can be hard.
Investing is no different.
As humans, we fall prey or all sorts of biases, blind spots, and cognitive errors that can cause us to make poor decisions.
A good Financial Advisor will spend most of their efforts saving you from yourself.
When markets tumble and you're ready to bail out, a good Financial Advisor will help you stay invested.
When markets zoom upward and you're ready to pile on more risk, a good Financial Advisor will keep you from biting off more than you can chew.
When you are deciding between one course of action and another, a good Financial Advisor will replace emotion and instinct with fact, analysis, and data.
A good Financial Advisor will help you keep up with all those boring bits of maintenance like monitoring asset allocation, ensuring you make your, checking for tax-loss harvesting opportunities at year-end, or making sure your investments still fit with your goals.
By simply helping you manage your behavior and maintain good habits, a Financial Advisor may earn his or her fee hundreds of times over.
Planning Brings Clarity
If I had to guess, I would posit that you spent more time planning your last vacation than you've spent planning for retirement.
Because people generally find vacation planning is fun and easy, but find retirement planning boring and hard.
But I would argue that planning for long-term goals like retirement has a bigger impact on your long-term happiness than all the fantasy vacations you could pack into a lifetime.
Basic financial planning is within the grasp of most people.
Simple goals like building an emergency fund or saving for a down payment on a house require only basic math. You don't need me for this sort of thing.
But when you have multiple goals being fulfilled at different times, with varying risk tolerances, and limited means, that's when a professional can bring a good deal of value.
A who specializes in planning has the training and tools to help you organize, prioritize, and judge the long-term effects of a set of trade-offs.
No one can predict the future, but we can get mighty close - and at the very least, we can get you pointed in the right direction.
Your Time Is Valuable
Time is money, as the saying goes, and I value my time over just about anything else.
It's the one thing I can't buy and can't get back once it's spent.
Because time is so valuable, I often hire people to do things that would otherwise take up a lot of my time. I would rather spend my precious time on things that I enjoy while allowing an expert to handle things I don't.
Not to mention that you're much less likely to spend 30 to 45 minutes on hold waiting for someone in a call center to pick up and answer a simple question. Having a human who knows you, and is responsible for serving you, can be a massive time-saver all on its own.
By working with a Financial Advisor, you free up time, energy, and emotional bandwidth for other things in your life that bring you joy, or those that only you can attend to.
There are, unfortunately, Financial Advisors out there charging hefty fees who aren't offering much value to their clients.
If you have such an advisor, maybe a bit of probing is in order.
Ask them to explain what they are doing to earn their fee. If the explanation isn't satisfactory, you can ask for a fee reduction or shop for a new advisor.
This might seem like dangerous advice. What if one of my clients were to read this and subsequently call to ask how I'm earning my fee?
In truth, I would welcome that conversation.
In fact, it's one that I have with my clients on a regular basis.
Clients should know what they pay and what they are getting in exchange.
It's important to me that the discussion around fees be ongoing and transparent. And this openness is a competitive advantage I'm not willing to cede.
You can absolutely be successful as a DIY investor.
But if your situation has become complex, if investment mistakes are holding you back, if planning can help you make more confident decisions, or if you simply don't have the time to dedicate to investing effectively, working with a Financial Advisor like me might be worth every penny.