Do You Need a Financial Advisor?

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My financial adviser is a great guy – real smart too.

But, over the time frame  of a couple of years I started feeling less and less comfortable about the investing partnership.  So, in early 2008 I jumped into the driver’s seat.  I moved all my funds into a self directed account at TD Ameritrade, and with the guidance of the Sound Mind Investing Newsletter,  I took control of my investing.  You may be nervous about doing your own investing because you don’t know deep investing terms like P/E ratio, but that’s alright.  All you need to do is follow a simple guide on how to start investing.

Why I didn’t need an independent financial advisor

Photo by Rednuht

  • I struggled to find a financial adviser that fit my needs.  This is mostly due to the fact that I live overseas and am forced to do all my interactions via email.  It was difficult for me to have a clear sense of what he was advising and why.  I think he was frustrated to communicate everything by email and I felt like the information he was providing was not sufficiently providing me the information I needed.
  • Because my investment accounts (2 IRAs, 2 ESAs, 1 investment account) were smaller (total under $50,000) I felt like I was not getting a lot of personalized or customized investing advice.  My account simply did not generate enough income for my adviser to spend much time with my account, and honestly I felt like it was unfair for me to expect him to provide me with more information.
  • My wife and I have young children (two with one more arriving in two weeks – all under four).  From the day they were born we started saving $100 per month for their college.  We opened Educational ESA accounts for our kids’ college once they accumulated enough for fund minimums.  It seemed inefficient (costwise) to pay a flat account maintenance fee on an account with such a low balance.
  • I felt like too much of my investments were going towards loads.  I paid 5% to be directed towards a mutual fund.
  • Poor performance.  Let me mention that we remained with the same brokerage (couple different advisers) for eight years.  I didn’t have a bad year, but consistently my investments were under performing the market averages.  I basically thought I was smart enough to under perform on my own.
  • I felt like my investment experience (I bought my first mutual fund 15 years ago) was enough for me to begin making informed decisions.  I came to realize that financial advisers do not have some secret knowledge for making good decisions.  They have some wonderful analysis tools, but no secret knowledge.
  • I decided that I cared more about my investing than anyone else.
  • I decided that I was willing to devote more time to my investing than any one else.
  • I think the straw that broke the camel’s back was when I wanted to add a mutual fund to my IRA and was told I could not because it was not a load fund.  It was clear that I was only permitted to invest in mutual funds that made him a commission.  I felt that his profits were taking priority over my portfolio.

Can You Trust Your Financial Advisor?  In my case I couldn’t.

How to transition from financial advisors to your handling your own investing:

I decided that I would take a year and learn everything I could about investing.  I read books, surfed the web, and read articles.  It is amazing how little I really knew about investing after 15 years of doing it.  My financial adviser provided me an emotional security blanket, but because I had him I felt a lesser responsibility to need to know the details.  I trusted him so I took a pass on educating myself.  That year of learning was the greatest investment decision I have ever made.  It will provide returns for the rest of my life.

Then I fired my financial adviser.  Actually, I just sent him a nice email saying I was moving my funds.  Honestly, I think he was glad because I was demanding more of his time than I knew he wanted to give.

Being a Christian I was seriously considering value-based investing, but ultimately decided (for a million reasons, but that’s another post for anther day) that it was not a necessary part of my investing strategy.  Ultimately, I came across Sound Mind Investing.  I liked the fact that it provided me with an ongoing education, insight, guidance and some tools to analyze the market.

So I moved my funds to TD Ameritrade, buckled up my seat belt and enjoyed the furious downhill ride of 2008.  What a wild ride!  Regardless, I do not have any regrets about jumping into the driver’s seat with my own investments.


  1. says

    I learned my lesson on my first investment, which was a mutual fund that had an 8.5% front-end load.

    It wasn’t the load that discouraged me away from an advisor as much as the poor performance. After the Black Monday crash, this Mutual Fund just never recovered.

    So, I signed up for my own no-load mutual fund and I have been in control of my investments ever since.

    The surest way to underperform the market is to give someone else part of your investment right off of the top.
    .-= Bret´s last blog ..How to get Un-Broke by Watching TV =-.

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