The Wall Street Journal recently published an article asking if it was Time to Say Goodbye to the 1% Investment-Adviser Fee? The article noted that, “The average investor with $750,000 paid 1.04% of invested assets in fees in 2020, up from 1.02% in 2015, according to Cerulli Associates, a research and consulting firm.”
It then highlighted some alternatives such as flat annual fees and monthly/hourly fees.
As you might imagine, the comments section was filled with readers questioning the value of financial advisors.
This particular comment caught my eye:
“It always amazes me how someone who’s managed to accumulate a seven figure plus net worth … can be so reliant on a hand holder rather than doing the research necessary to manage their own investments.”
For a bit of fun, try changing the final clause. For example: “It always amazes me how someone can be so reliant on a hand holder rather than doing the research…
- To change their own oil
- To sew their own clothes
- To set a broken leg
Ultimately, deciding to do something yourself instead of hiring someone to do something for you is a function of your time, interest, and ability measured against the cost of having someone do it for you.
The question of time is whether you literally have time to do something as well as whether something is the best use of your time.
Your interest speaks to your internal motivation to do something. Will you enjoy doing the task?
Your ability can be defined in many ways, from your skill in doing something well to your access to the necessary tools and resources. For example, my ability to decorate a birthday cake is not very good because I’m not very artistic and I don’t have any cake decorating tools such as those icing bags with the fancy tips.
This summer my wife and I hired a company to install a new patio in our backyard. It’s something we could have chosen to do ourselves, but we thought hiring a professional was a better choice. I’m sure that with a lot of effort I could have done the research on how to do it myself, but I wasn’t particularly interested in doing so, nor do I have any confidence in my ability to do it well (or even who to call to get one of those cement mixers to show up in your driveway).
Similarly, I’m sure that Elon Musk could develop the ability (if not the temperament) to manage his finances well. But I imagine his time is much better spent improving cars and rockets where he already has demonstrated amazing abilities.
For financial advisors and planners, your prospective clients are wondering, “Are you worth it?” Well? Are you ready to demonstrate your value? If not, time to get to work and showcase your ability to help them succeed.