Is My Financial Advisor a Total Waste of Money?

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By worldscope

3 Things To Consider Before Paying For Advice

The world of personal finance seems very simple at a glance, yet it is very complicated. However, most people are not able to differentiate the simple from the complex. The goods news is that you can easily get someone who understands the complexity and is able to plan your finances. The small problem is - he costs money. Is it worth it to spend money on a Personal Financial Advisor?

Let us start with the simple stuff which everyone understands. To become financially successful you need to do 3 simple things as a minimum.

  • 1) Save regularly
  • 2) Invest wisely
  • 3) Spend less than you earn

Complexity arises when you consider the myriad tools of finance designed to help you do the simple stuff and the legal and taxation effects of each tool.

For example, how well do you understand the following?

  • 1) Investment - Portfolio diversification, Asset allocation and Re-balancing
  • 2) Insurance - How to use insurance as an investment tool
  • 3) Estate Planning - How to protect your wealth from personal lawsuits, inheritance wars and avoidable taxes

If you wish to pursue wealth building on your own, you need to answer the following 3 questions regarding your Knowledge, Time and Desire.

Knowledge - Do you wish to learn about Money Market Instruments, Fixed-Income Capital Market, Equity Securities, Equity Derivatives, Investment Companies etc, budgets, retirement plans, estate planning, insurance, taxation, personal liabilities and more?

Time - In addition to your regular job, family, hobbies and friends, can you spare at least 10 hours a week, every week, to study the financial market in relation to your wealth building plan?

Desire - Do you seriously consider finance to be so interesting that you can pursue it for the rest of your life?

If you answered yes to all three then probably paying a financial advisor is a total waste of money. Otherwise, you will be penny wise and pound foolish.

Well, before you consider hiring a financial advisor, you need to put your house in order first. Pay off all credit card debt, maximize contributions to your 401K and Roth IRA and have at least 3 months income saved.

Quote: a lawyer who represents himself has a fool for a client.

Comments

Not part of the 1 percent 4 weeks ago

Basically, you need to be out of credit card debt and have significant savings before it's worth contacting a financial advisor. I don't give a darn about those "instruments" since I have no use for them until I get the basics resolved. Very few people are actually in the position to take advantage of a financial advisor. The problem is, there are too many of you, so you need to go after clients who really don't need your service yet.

Joseph 17 months ago

Good article! Good advisors spend a lot of time with their clients. The key to a good advisor is to work with one that will take the time to know you and what is important to you and then only make recommendations that fit you and your goals.

dentures pembroke pines  2 years ago

I envy your writing skills mate, this was a brilliant article. Thanks for sharing.

TCF Consulting 2 years ago

I really appreciate you sharing information on choosing a good financial advisor, for I have been looking out for one since a while. But now I am sure I will find the right one with the help of your advice. Thanks!

myfirst50000 profile image

myfirst50000 2 years ago

Nice article. I am not eally in favor of financial advisor. But it can be valuable if a person doesn't know how to deal with its money or is need of advice.

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