Do you use a financial advisor? I’m curious what people’s thoughts are. 

Hiring a financial advisor is supposed to be one of the signs that you have “won at capitalism”, but there is a growing movement of investors and rich people who adamantly advise against hiring a financial advisor. But are there situations in which a financial advisor makes sense, or is even necessary?

One person made a strong argument for the value of financial advisors in the r/Bogleheads subreddit (a community focused on passive investing) and asked the community for their thoughts and opinions. We sorted through the best replies, and here is what they said.

The Original Post

The author of the original post is a financial advisor who makes their living from commissions and fees from their clients. They say they use a “boglehead approach” to investments, which includes being conscious about fees for trades and investments, using only low-cost index funds, and generally letting investments grow on their own.

They say that they believe the discussion about the use of financial advisors has become counter-productive, and that they do provide a very valuable service, and they have experience and knowledge that they should be allowed to charge for, but too many people try to do it themselves or avoid a financial advisor simply because others tell them to, not because they have a good reason.

On the other hand, the author admits that there are bad advisors out there, just like any industry. There are those who will take advantage of their customers or up-sell them on investments or services they don’t really need. But just like any industry, the majority aren’t like that.

The thing is, according to the author, we pay or hire other professionals for services we can’t do or don’t know how to do ourselves. People like electricians, plumbers, carpenters, personal trainers, and more. Why should financial advisors be any different? Even John Bogle himself was a financial advisor.

The Community Response

Most of the community members who responded generally agreed that using a financial advisor can be very beneficial for people who don’t have the time to manage their investments themselves or are worried about managing their own money.

There was some disagreement, however, about what advisors should charge for their services and how long they will stay relevant.

The price divide comes down to a flat hourly fee vs. a percentage of investments. A flat fee makes sense for people who want to start big and ramp up their investments without worrying about their advisor taking a bigger chunk of their profits as their investments grow. On the other hand, a flat fee can be too expensive for those who don’t have a lot to invest, so a percentage of the total investments keeps the fee proportional across the board.

No matter the why or the how, everyone agreed that a financial advisor is worth it if you are able to pick a good one. Your financial advisor should not be churning through your investments, making trades at a high rate, making new recommendations, or upselling you at every opportunity. They should be your steward of your money and your wishes, not your guide.

In the end, most people simply do not want to sit down and learn everything there is to know about the complicated and corrupt world of investment banking. Additionally, most people’s finances aren’t complicated enough to warrant using a financial advisor. If someone doesn’t have the time, but their finances are getting complicated, that is who a financial advisor should be for, not the billionaires and scam artists. If you simply do not have the time, desire, or ability to manage your own investments, then putting some time into finding a responsible, honest, and trustworthy advisor can be money well spent.

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