Heads-up, this is a biased and self-serving post. I make my living as a financial advisor, so I am telling you from the start, read this with a healthy dose of skepticism and actively question any assertion I’ve made; message me directly if you want.
And while today I want to convince you of the merits of hiring someone to help with your finances, it’s equally important to note that all financial advisors are not the same. There are bad actors and some questionable practices out there. When I say you should have a financial advisor, I mean a good advisor; the right advisor. This post will be dedicated to helping you better grasp why an advisor can help. Future posts will focus on choosing the right advisor.
I’ve been the DIY-type my entire life. Two years ago, I built my own garage and last fall I started a porch addition on our house (“started” is the operative word here; we haven’t had stairs up to our front door in 6 months). There are several reasons why I do things myself. One, I enjoy working with my hands and learning real-world skills. Two, there is satisfaction in building something tangible; a satisfaction I don’t exactly get slouched in front of a keyboard. But probably more than anything, I don’t like to pay someone to do something I could probably figure out on my own. After all, I’m handy (or at least tell myself that) and the internet provides all the information you could ever possibly need.
Yet, after reading endless articles on how to properly insulate a cape-cod style attic, I find all the different opinions on how to do it “correctly,” but I’m still left with the question, who is actually right? And what’s the consequence for being wrong? I can also watch video after video of hanging, taping and mudding drywall, yet, shockingly, it doesn’t seem so effortless when I try to replicate. It’s like watching Tiger Woods hit a ball over and over again and then picking up a club and expecting a similar result.
Several weeks ago, against my nature, we decided to hire someone to drywall the upstairs of our house. This, it turns out, was one of the best decisions I’ve made. It took them all of two hours to do what would’ve taken me two weeks and they did a better job than I could have. They used tools I have never seen before, effortlessly made complex cuts, and didn’t have to pause every 15 minutes so they could reference a YouTube video of someone who looks like they know what they’re doing. Sure, I didn’t like parting with the money and I have been deprived of the oh-so-satisfying work of sanding drywall for a week straight, but the time, effort and mental energy I’ve saved by hiring someone, was more than worth it. I’d pay that cost again and again. In simpler terms, Value > Cost.
I’ve also been working with a personal trainer for the past year. This is something I’ve outright rejected my entire adult life. At the gym I used to be a member of, I would observe the personal trainers pay more attention to their phones than the person they were “training.” And I’m no expert, but forcing a morbidly obese person to do a sled push across the gym on their first day is probably not a recipe for long-term success. Just a guess. My thought was that I don’t need to pay someone to tell me how to exercise, I’ve done it for years and the internet is, again, full of resources. What could a trainer really do for me?
A lot, it turns out. I hate leg day. Going it alone, I found many creative ways to justify skipping leg day. I can’t do that anymore, legs are on Thursday and they’re not the leg exercises I enjoy (like slow, gentle walking). But I am finally working on a long-neglected part of my body. I also have some past injuries that limit what I can do. On my own, I would typically avoid these muscles altogether for fear of further injury, but my trainer provides modifications so I can work the muscle group without pain. He also watches my form closely and tells me how to adjust in order to get more benefit from whatever exercise I’m doing. We work towards specific goals, like building a stronger core so my lower back doesn’t hurt every day. Finally, what cannot be understated, is that he keeps me accountable. There are many, many…many days that I have no desire to exercise, but I pay him and he expects me to show up, so I’m there 2x per week, every week. Again, Value > Cost.
Hopefully, by this point, you’re starting to pick up what I’m laying down.
Most people don’t work with a financial advisor. There are many reasons for this. Many feel they can do it just as well on their own. Some don’t trust someone else to handle their money. Others don’t think they have enough to work with an advisor and some may feel it’s too expensive. Perhaps, for more than care to admit, it’s because of pride, ego, or embarrassment. Whatever the reason, most end up dealing with it themselves, or, to a varying extent, not dealing with it.
This shows itself in the sad state of the finances of many Americans. We’ve all seen or heard the statistics on credit card debt, lack of retirement savings, or inability to pay for an unexpected expense. I’m not tone deaf to the impact of the pandemic on many people’s wallets; this was a large problem long before anyone had ever heard of Wuhan.
But as my own experiences demonstrate, you don’t truly know what the right professional can do for you until you start working with one. You don’t know what you might be doing wrong. You don’t know what could prove more effective. You don’t know what you might be missing. Simply put, you don’t know what you don’t know.
With house projects, it could mean creating a mold issue because you created a vapor trap in your attic. With exercising, it might mean inefficient workouts leading to minimal progress and frustration and even injury.
In the case of money, whether it is always struggling to get your budget under control, unknowingly making imprudent decisions, taking too much (or too little) risk, missing out on important tax advantages, forgoing critical insurance coverage, or a host of other examples, the consequences range from a mild inconvenience to absolute disaster. What you don’t know can be very costly, both financially and mentally. It’s no secret that money is a significant stressor for many households; it just something people don’t talk about openly. As the poet and philosopher Calvin Broadus Jr. once conveyed in his essay on “Gin and Juice”, “My mind on my money and my money on my mind.” Many of us have money on our mind far too often.
This is a problem. Money is a necessity in life, but money is the tool. You shouldn’t have to spend so much time thinking about a tool. But, if I built my garage nailing every nail with the claw end of the hammer, I’d probably be frustrated and stressed out! And it would’ve taken me way longer to accomplish what I set out to do. I can’t even imagine the embarrassment if, right before the last nail went in, someone showed up, turned the hammer around and effortlessly sunk the nail with two swings. I get it, money is more complicated than this, but hopefully you can appreciate the analogy. Used improperly, money (and actual tools) doesn’t do what it’s designed to do…it just creates more problems.
But Matt, I don’t have enough money to work with an advisor!
As I said at the start of this post, all financial advisors are not the same. They are not the same in what they do for clients. They are not the same in how much they charge for their services. And they are not the same with the types of clients they work with. If your assumption is that all advisors only want to work with those who already have money, you’re wrong. Not all advisers manage investments; many just help with planning. They don’t all sell products; some just give advice. Not every advisor works with retirees, some want to help people early in their career to pay down debt, manage cash flow and make the right foundational decisions. The fee structures vary wildly as well. Many advisors get paid based on assets under management (in other words, how much money they manage for you) or earn commissions on selling products, but there is also a growing number of advisors who charge a flat-fee or an hourly rate, which has opened up the door for those who aren’t already wealthy.
Maybe your situation doesn’t justify an ongoing relationship, but that doesn’t mean someone can’t point you down a good path. Perhaps you’re a family with young children and could benefit more from general financial advice and planning than investment advice. Or, maybe your already in a great situation, but the right advisor can have ideas and strategies to make a good situation even better. Regardless of circumstance, there is an advisor out there for everyone.
I hired a contractor and a personal trainer because their knowledge, skillset, ideas and accountability leave me better off than if I tried to go it alone. By definition, a financial advisor should exist to make you better off financially than you would otherwise be; their value should exceed their cost. We all have different definitions of what “better off” might mean, but you’re probably unaware of what’s possible in your own situation unless you talk with a professional about your finances. And I’ve never met anyone who wants to be broke, or one unplanned event away from financial stress and anxiety.
Look, life will continue for you whether or not you hire an advisor. Notice the title of this post didn’t say you need a financial advisor. There is very little in life that you “need,” so it would feel a bit pompous to use that verb. And some truly can do it on their own. They have the time, interest and skillset. But for the majority of us, it’s simply the results we’re after. It’s the relaxation that comes when you spend less time worrying about the month-to-month, the comfort of knowing you don’t owe anyone anything, the peace that comes with choosing whether or not to continue working, and the satisfaction of being able to help those truly in need. If this is you, then you should have a financial advisor. Doing nothing is not a good solution.
In my next post, I will discuss in more detail how to go about finding the right advisor for you and how to approach the initial conversation with intelligent questions.