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How Long to Determine if Financial Advisor Provides Value for Given Cost?

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  • How Long to Determine if Financial Advisor Provides Value for Given Cost?

    Hello Forum


    Like some of you before, I've had my own unplugging from the Matrix moment within the last 6 months when it comes to personal finance and investing.  What WCI and the rest of the forum members offer has truly been life changing for me and my family and I want to say thanks for all the useful information.  As my education on personal finance and investing get up to speed, I've decided to use a financial advisor to help us get going.  In the back of my mind, I may want to be a DIY investor someday, but I don't feel I have the knowledge or confidence to do that yet.  My question to the forum is how much time would you give a financial advisor to prove they add value for the price you pay them?  Six months?  One year?  Or do we need a longer timeline?  Any advice or perspective on this would be appreciated.

  • #2
    Not sure what your metric for adding value is.  If it is just until you learn to DIY, then be flexible with your timeline.


    • #3
      Why a lifetime of asset under management fees, of course!

      If a financial advisor sells you an expensive whole life policy instead of high quality, low cost term life insurance, then you lose. If you follow their advice to put money into taxable accounts where they get asset under management fees instead of maxing out qualified funds and paying off student loans that have a higher interest rate than the prevailing 30 year mortgage rate, then you lose. Buy an annuity? They win, you lose.

      When you’re a resident or very early in the investing game, an asset under management approach may be cheaper than an hourly fee or an annual retainer. However, if they sell you a product with 12b1 fees or commissions or cause you to do something less than optimal with your money, then you can lose a lot of money. You may never write a check for the amount of money that bad advice costs, but you still could pay dearly.

      There are good advisors out there. Some advertise on this site. Others can be found at Make sure you check to make sure your would be advisor isn’t a crook. Also check their firm’s SEC ADV-2 to see what you’ll actually pay.

      Finally, I’d recommend White Coat Investor’s “Fire your Financial Advisor” course for $500. Even if you end up using an advisor, it’ll give you the tools and knowledge to be confident you’ve selected a good one. There’s value in tax and estate planning, planning and prioritizing paying down debt and saving for a down payment, avoiding behavioral finance risks when the market tanks, etc. Most folks on the forum are do it yourself types, but a good advisor is the right choice for a lot of people.


      • #4
        for another perspective, I still have a financial advisor decades later.

        the people on this board, I believe, represent a minority of physicians who would not benefit from FA.

        there are lots of different ways FA might help you, especially if you are considering a fee based FA.

        you are gifted with a profession that offers high income.  Hopefully that high income helps you optimize your free time and happiness.   some people pay for cleaning services, or lawn services, or CPA/ tax attorneys, or other things.  Especially if you own your own practice.  You have to decide whether the cost of the FA versus the time you spend to make yourself comfortable is worth it.

        if the goal is to FIRE, you would be best served to focus on doing things that allow you to maximize your income and minimize your expenses.  the FA may allow you to do that in the early years so that you can sleep more comfortably at night.  or you may just worry about their commissions and how they hold you back from FIRE.

        There are lots of ways to lose money.    good news is with high income, you can overcome mistakes.

        I think if you don't want a FA that's fine.  there are plenty of do it yourself plans.  emergency fund and then pay off debts/invest three fund portfolio.

        there is no one right answer and one wrong answer.

        good luck.




        • #5
          I used a financial advisor earlier in my career.  I do it myself now.  If you are uncertain it is ok to use an advisor.  Look for a fee only fiduciary.  I learned two things from my first advisor 1.  SAVE.  2.  Even if you make a mistake it is better to save and readjust than not saving at all.


          • #6
            What do you want from a financial advisor besides help with asset allocation?  If it is difficult to come up with anything, it's hard to see how you'll come out ahead compared to a low-cost Robo-Advisor.  Just put in something reasonable (like 80% stocks and 20% bonds) and forget about it until you've done WCI's course, spent some time on this forum, or read a few books.

            Unfortunately in addition to their fees, most financial advisors have conflicts of interest that will lead to underperformance.
            “Work” is a four letter word for good reason.


            • #7
              I have a different perspective. I have my own advisor and plan to keep him.  If you believe in your advisor, there is a trust factor there.  I trust mine 100%. My sister is also a physician who has different FA, that charges AUM, she felt secure since she reached her goals ( being a millionaire by 40, debt free by 44) despite the fees. I also do not compare myself with others- everything is noise- what your portfolio did in the last few years is yours to keep and mine to keep as well. I tend to see what FA does in completion of the market cycle- from the last downturn to the next.  Eg from 2007-2009, I was positive and fully recovered by 2010.  I will wait and see what the next downturn brings me. I honestly think a lot of people will need guidance during a bear market and that's when you see worth of your money for your FA.  This is just my 0.02.


              • #8
                Value is a pretty subjective term in the world of financial advice.  The range of services and fee structures are all over the place.  I think its smart to be asking the question. I ask a similar question of myself any time I am talking to a new client.  I spoke to a prospect last week and talked him out of working with me for an ongoing fee because he was already doing so much right.  Instead we decided to do a periodic check-up to make sure he is staying on track.  If I was in your shoes I would be asking the following questions:

                • Is the advisor saving me time and would I be better off doing all of this myself.  Often physicians are busy and their time is invaluable, so how much time do you want to dedicate to learning and understanding personal finance and investments.  Clearly, you are bright enough to learn, and it seems like you are interested in learning more, so it may be worth it for you to commit the time to it.

                • Is my advisor a salesperson or a fee-only planner?

                • Is the advisor helping me create a financial plan or simply managing an investment account for me?

                • Is my advisor helping me to understand risk and my plan for dealing with fluctuations in the financial markets?

                • Is the advisor helping you to maximize tax efficient investments and including tax planning as part of my services?

                • Is my advisor looking at my debt, insurance, budgeting, and estate planning?

                • What is all of that worth to me?

                If you are really wanting to do it yourself or do some things yourself, you may want to give it a year and decide what parts of the process you want to take on and where it might make sense to outsource part of the process.