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5 Reasons You Can't Be Your Own Financial Advisor

As a financial advisor, I often get asked by people why they should work with me. It’s a completely understandable question. In fact, many of my family members and friends still ask me what, exactly, does a financial advisor do?

Many people who want to know more about the value I bring to the table as a financial advisor are motivated by the same outdated concept: they believe that they can be their own financial advisor. In the information age we live in, there are endless articles for you to explore how to DIY, including your financial life. However, I firmly believe that you can’t be your own financial advisor. Here’s why.

#1: You Need a Behavior Coach

The first (and most important) reason you can’t truly be your own financial advisor is that you can’t really act as your own behavior coach. Of course, we all work to improve ourselves in one way or another. The constant drive to be and do better is part of what makes us human. But, when it comes to money, it’s tough to coach your habits and behaviors by yourself.

Financial advisors help to identify your biases and work past them in order to make the best financial decisions for you and your family. 

When you’re trying to DIY your finances, you will most likely make decisions based on gut feelings, mental shortcuts, or by reading half-baked articles online.

Stock Market Panic

An advisor helps you to avoid making decisions that could hurt you in the long-run (even if they feel right in the moment). For example, they help to keep you invested during market roller-coaster drops. And they help you identify negative beliefs you may have about money, wealth, or investing, that are keeping you from reaching your full potential. They can even help you to change bad spending decisions that you weren’t even aware you had. That’s because it’s easy for advisors to step back and look at your money-related behavior objectively. It’s harder to do that by yourself.

#2: You Don’t Know What You Don’t Know

I’ve been a financial advisor for over a decade. And you know what? I still learn something new every day. I’ve calculated the hours and have spent about 656 hours studying for and completing my CFP® certification. In addition, I now have ongoing continuing education requirements that keep me up to date.

I believe that you’re financially savvy. I even believe that you’ve spent hours of your time doing the research to make good financial decisions. But it boils down to this: you don’t know what you don’t know. If you don’t work with a CERTIFIED FINANCIAL PLANNER™ professional, you’re probably missing a lot of valuable insight and information that could help you reach your goals more efficiently.

#3: You Can’t DIY Everything

There are things in your financial life that you just can’t DIY. For example, it’s tough to DIY huge life-changing transitions that impact your finances. If you’re inheriting wealth from parents or grandparents, or you plan to pass on wealth to your children or grandchildren, you’re going to be faced with so many choices. There are emotional motivators for some of these decisions - but there are also legal rules that need to be followed. It’s tough to DIY the more complicated nuances of these financial moments - and a financial advisor can help.

Another great example of this is your retirement strategy. When it comes to planning your retirement, there are endless complex rules, regulations, and considerations. To DIY that strategy, you’d need to be an expert in RMDs, Catch-Up Provisions, Contribution Phase-Out Rules, Social Security Earnings Limits, minimizing taxes, structuring withdrawals - and that’s just to name a few key factors. You’d be significantly better off working with someone who focuses on those details full time.

#4: Life Happens

Who here has gotten so busy that they keep putting important “to do’s” on the back burner? Can I see a show of hands? We’re all guilty of this. Maybe you leave the sink full of dirty dishes because you run out of time, or maybe you have to cancel a meeting because you’ve fallen behind. The point is: life happens.

Mom Too Busy To Manage Her Finances

Unfortunately, your financial life doesn’t stop just because you get busy. Bills still need to be paid, and every day you get one day closer to your retirement. You can’t be your own financial advisor because you can’t possibly be on-call 24/7. You have a life. Allowing a professional to help guide you and to monitor things for you helps you to enjoy your freedom and still find financial success.

#5: You Can Only Take Care of You

As much as you might be a rockstar when it comes to handling your own finances, you can only take care of you. A financial advisor can help to ensure that your spouse, kids, and parents are cared for, too. Whether it’s by evaluating how much life insurance you need, or by helping you to determine the financial implications of caring for aging parents - an advisor can help you take care of yourself and everyone you love.

The Numbers Don’t Lie

If these reasons weren’t inspiration enough to contact a financial advisor, it’s also worth looking at the numbers. Multiple studies have shown that a good financial advisor can help to increase your portfolio earnings by 3-3.75% more than what an investor could come up with when working alone.

Furthermore, Vanguard has estimated that only one quarter of investors are self-starters when it comes to their personal finances. Working with a CFP® professional ensures that you’ll always have a “money coach” who has your back. Of course, not all advisors are worth working with. Many of them are salespeople in disguise who work on commission. That’s why it’s important to look for a fee-only advisor who is also a fiduciary - and finding a CFP® practitioner is an excellent start. If you’d like to chat about how I can help you get on track to meet your financial goals, contact me today.

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Desmond Henry, a financial advisor in Topeka, KS

Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.