September 17, 2020

4 Common Reasons People Refuse to Work with a Financial Advisor, Ep #11

18 minutes

Are there good reasons to NOT work with a financial advisor? Have people had poor experiences? Is it a complete lack of trust? People have shared their reasoning with me when I find out they've chosen to avoid working with a financial advisor. In this episode of Retirement Made Easy, I share what those 4 common reasons are—and whether or not I think they're valid.

You will want to hear this episode if you are interested in...

[0:21] 4 Reasons to NOT work with a financial advisor
[2:27] Reason #1: Investment management is a hobby
[5:55] Reason #2: The cost is a roadblock
[7:39] Reason #3: A lack of trust
[10:10] Reason #4: You don't have the money
[15:55] The cost of working with a financial advisor

Reason #1: It's your hobby

This is the most popular reason I've heard when someone chooses not to work with a financial advisor. We are in the information age where you can research almost everything online, so some people prefer the DIY route. But remember—information is NOT wisdom.

You need a firm idea of what you're doing before you implement your plan. There are a lot of people who want to manage their own portfolio. If you enjoy it and succeed, that's perfectly fine. It's like a car enthusiast who likes to work on their own car as a hobby. It brings them fulfillment. If you're one of those people, keep doing what you enjoy.

Reason #2: The cost is a roadblock

Some people aren't comfortable with paying for the cost of a financial advisor, whether it be an advisory fee or an hourly fee. It's similar to someone who wants to do their own taxes to save money. If they can do the same work on TurboTax or H&R Block online, they'll do it to keep their expenses low. They're also the type of person that invests in index funds, stocks, or bonds that don't have annual fees associated with them. Many brokerage firms are low cost these days. But I believe paying a financial advisor for their advice, ongoing support, and advocacy can be fairly reasonable.

Reason #3: A lack of trust

Some people are completely unable to trust financial advisors with their money. I spoke with someone who was involved in a business deal where his partner embezzled money from the business. It ruined him financially. As a result of the incident, he'd never trust another individual with his financial affairs.

I understand that it can be hard to trust a stranger or another person to be a financial advocate for your family. I would agree that it's probably not a good idea to work with a financial advisor that you can't trust. But it is possible to find someone who is trustworthy that has your best interest at heart.

BrokerCheck by FINRA is a great resource you can use to find a financial advisor. You can enter their name and find out how many years they've been licensed and if any regulatory actions have come up while they've been in business.

Reason #4: You don't have enough money

I recently spoke with a gentleman that wanted to work with his brother's financial advisor. But he was told the advisor would only work with people managing $10,000,000 or higher. His area of expertise was financial endowments, nonprofits, and corporations. This gentleman was under the impression that only the wealthy could have a financial advisor. This isn't true. Everybody starts somewhere. Everybody's retirement plans are different. Everyone has different resources.

Some financial advisors may have a minimum asset requirement to work with them. But financial advisors can specialize and serve whatever market they prefer. Some advisors might prefer to work with millennials who need help with paying off student loan debt or buying their first home. There are plenty that focus on working with clients 50 years or older who need help transitioning to and through retirement.

All advisors are not the same. Just like there are different specialists with doctors, financial advisors can have different specialties. But there are plenty of competent and qualified advisors that can help you, even if you're just getting started. To hear the full discussion and my thoughts on each reason, give the whole episode a listen!

Resources & People Mentioned