It may be one of those indicators that signals the top of the stock market, but I’ve recently been inundated with a series of questions that boil down to this: Should I fire my financial advisor?
Perhaps investors think it’s easy to achieve double-digit returns because that’s what’s happened over the last 18 months or so.
In 2022, a disastrous year for investors, few have considered parting ways with their financial advisor. Yet if you’re paying someone to simply allocate your assets, there are plenty of less expensive alternatives.
If you’re looking for a way to recoup investment advisory fees, the easiest way is to do it yourself. Start by opening an account with one of the large companies that offer low-cost index mutual funds or exchange-traded funds.
Once you’ve transferred the money to the new account, you’ll need to set your time horizon, an important part of establishing your asset allocation. The next step is to honestly assess how you feel about risk. Think back to 2022 and ask yourself if you were worried or lost sleep over the decline in values. Conversely, if you reduced your risk and now feel bad about missing out on the subsequent rise, pay attention to that, too.
Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, recently wrote: “Investing in yourself is a form of regret minimization. Some investors regret missing out on big gains, while others experience even greater regret when they suffer big losses.”
You need to be clear about which regret causes you the most anxiety, and then take that answer into consideration as you prepare to put your money to work.
There are many companies that offer risk assessment tests, asset allocation tools, and lots of support content to help you. You can also get information and free advice on various social media channels.
You just have to be careful to understand the motivations of those seeking advice, regardless of the platform. As I noted in my book The Great Money Reset , when you seek advice on YouTube, Reddit, TikTok, or podcasts, “you’re entering the investing whirlwind: There are some very smart people, some who have no idea what they’re doing, and some who have a specific agenda and are trying to push one investment idea or another. Sift through what you encounter with a careful, skeptical eye.”
There is also a middle ground between paying someone to manage your money and doing it yourself.
Automated investment platforms (also known as “robo advisors”) can take the investment selection process off your hands. Each robo product is slightly different, but they all typically start by asking you to answer a series of questions. The results are processed by an algorithm, and hey presto, your money is put to work.
The cost of most robots is typically less than 0.25% per year, which is much cheaper than the 1-1.5% charged by full-service brokers. If you have more than a certain amount of money invested in the robot, you may also have the option to pay a small fee for financial advice.
So who should pay for personalized financial planning? Anyone whose financial life is more complex, perhaps because they own a small business, or anyone with a large income who doesn’t have the time, energy or inclination to do it on their own.
Additionally, anyone going through a major financial event, whether good or bad, or considering a major change, such as a career change, can also benefit from the advice of a certified financial planner.
Jill Schlesinger, CFP, is a business analyst at CBS News. A former options trader and chief investment officer at an investment advisory firm, she welcomes your comments and questions at askjill@jillonmoney.com. Visit her website at www.jillonmoney.com.
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