January 14 2011|08.50 AM UTC

Samantha Eckles

Personal Financial Advisor: Worth the Price, or a Waste of Time?

Category: Personal FinanceTags: , ,

Without money you can feel lost, hopeless, and stressed. The key is not just to acquire money, but rather, it is knowing what to do with money. If you are interested in making money work for you, then you need to know the tricks of the trade. Would a financial advisor be beneficial to you? There is solid logic on both sides of the argument. Here are some pros and cons to getting a personal financial advisor.

PRO – They know more than you do.
(Pro: 1, Con: 0)

Admit it: you don’t have the faintest clue how bonds work. Unless you spend countless hours a week immersing yourself in Wall Street Journal and MSNBC, you only have basic knowledge of how markets work. Bonds, the value of gold, and stocks, might be vague concepts to you.

A financial advisor will know the ins and outs of the market, and where your money should go, based on your long term and short term goals. You can do it yourself, but any mistake will be costly. Are you ready to take that chance?

CON – They can’t guarantee you anything.
(Pro: 1, Con: 1)


Just because the title says “Financial Advisor” doesn’t mean they are good at their jobs. Go ahead and find a broker or advisor who fully guarantees their financial plan. Couldn’t find one? That’s okay, because they don’t exist. Financial advisors are giving you, by the nature of their name, their advice.

They can promise you anything. While you might not be looking for guarantees, you should keep in mind the inherent risks. If you know a thing or two about the market, you can make the investment yourself with the same guarantee.


CON – They are expensive.
(Pro: 1, Cons: 2)


Commission fees will add up after (very little) time. As mentioned previously, advisors are simply giving (expensive) advice. Some advisors cost up to three percent of your investment.

This, of course, doesn’t include the money you would need to spend for an advisor to draw up a plan in the first place. The three percent might not seem high, but when you consider how much money you are looking to invest, that number can certainly add up.

PRO – They afford peace of mind for you.
(Pros: 2, Cons: 2)


Maybe not this much peace of mind.

Financial advisors can give you the peace of mind to take off your shoes and look like an idiot. You lead a busy life; it’s hard to juggle everything that is on your plate. Adding the weight of managing your financial future could be too much.

An advisor will do the work for you. They move the money, put it where you want it, and look into the future for you. All you have to do is trust in them while they will take care of the rest. That’s the peace of mind you want while dealing with your future.

CON – They aren’t needed to play it safe.
(Pros: 2, Cons: 3)


Do you really need an advisor to open up a mutual fund? If you are looking to turn hard earned money into millions overnight, then you need a top level advisor. If you want to turn thousands into more thousands over 50 years, then you can skip the suit and do it yourself.

Chances are, you will take the money and dump it into mutual funds, anyway. To put money in a mutual fund you need to walk into your bank or get online. That’s it. You don’t need more help than a customer service representative.

PRO – They are good in a crisis.
(Pros: 3, Cons: 3)


Where do you turn when your money goes up in flames? Remember the last time the stock market took a nose dive? Everyone panicked. It would have been nice to have had an advisor guiding you through what that panic meant for your money.

Information is vital when times seem uncertain. A financial advisor can make sense of the mess and offer reassurance going forward. Your laptop and a freaked out spouse cannot do the same.

CON – You have the internet: you don’t need a financial advisor.
(Pros: 3, Cons: 4)


There used to be a time when information was privy to those in the know. Nowadays, information is available to anyone with a wireless router or a smartphone. If you are looking to study the trends of stocks and funds, then you can do it all without the help of an advisor.

Most of the big investment firms will give you online resources to look up market trends and mutual funds performance. This makes an advisor almost obsolete (much like travel agents). Spend some time doing the research yourself, and keep the commission.

CONCLUSION

The decision to go with a financial advisor comes down to priorities. If peace of mind is your priority, then an advisor makes sense. They can study the market and formulate a game plan for your goals. If your priority is getting the biggest return on your investment, then you’ll want to skip paying an advisor three percent. The decision won’t be easy, but it is totally up to you.

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