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Is Hiring a Financial Advisor Worth It?

If you’ve ever considered hiring a financial advisor, you probably also asked yourself this question: Why should I pay an advisor when I could probably just manage my investments myself?

It’s a legitimate question, and one you should consider carefully if you believe that self-management of your assets is a viable option for you.

Is a financial advisor worth the cost?

One of the first things you should ask yourself if you’re thinking about whether or not a financial advisor is worth the cost is whether or not you believe you could achieve at least the same results on your own that an advisor may otherwise be able to provide on your behalf.  The person who manages your assets would have to make certain choices about which investments may be suitable for you and how long you should keep them, as well as what your asset location and allocation should be, how you manage your taxes, and how to know which options to consider for your Social Security and pension benefits.  If you were going to achieve the same results, you would need to mirror the decisions about your investments that your advisor would have made.

The problem, though, is twofold.  First, are you able to objectively decide which investments may be suitable for you?  And if so, are those what a professional money manager might make?  Secondly (and perhaps more importantly), can you keep your emotions in check and prevent them from ruling your investing decisions?  When a person goes the “solo” route, studies have shown that all too often they give in to their emotions and overreact during market downturns, selling off their funds or stocks in order to avoid further losses.  Once they’ve done that, when the market recovers (as it’s historically done), they wind up missing out on the rebound gains, only jumping back in when they’re finally convinced that the rebound is real — usually long after values have gone back up.

In other words, they tend to buy high and sell low.

The Average Investor Typically Under Performs the Market

The average annual return of the individual investor underperformed the S&P 500 by almost 2 full percentage points over the last 20 years, according to the research firm DALBAR [source cited below].  While 2% may not seem like a huge difference, over the course of 20 years of investing, that 2% per year can add up: doing the math, a buy-and-hold investment would be 43% higher!

Those figures are, of course, hypothetical, and there’s certainly no guarantee that any advisor’s or individual investor’s strategy will produce positive results over a given period of time.  But what it does suggest is that having an impartial professional manage your investments, one who may be able to “talk you down from the ledge” during the tough times, may well be worth what you’re paying that individual for.

A Financial Advisor’s Added Value

Every investor will have a different amount of their portfolio invested for growth.  And an advisor who’s managing the growth portion of your portfolio should never promise that he or she will outperform the market. What they should promise you, though, is that they’ll work with the goal of keeping you on track to deliver consistent long-term growth — something that the vast majority of investors who try to time the market and who don’t have the mental stamina to hold on during volatile times cannot do.

If emotion begins to play a role in your investment decision-making, your advisor may be able to prove their worth to you by reminding you why you invested in the first place, and to reassure you that sticking with your strategy, even in a down market, may really be the best course of action.

Of course, only you can make the final decision as to whether or not hiring a financial advisor is right for you. There are a lot of factors to consider here.  If you want to know more about what an advisor may or may not be able to do for you personally, let’s talk. We’re here to help.

Important Information:

The information provided should not be considered specific tax, legal, or investment advice and is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy (including the investments purchased and/or investment strategies devised by Lucia Capital Group (“LCG”)) will be either suitable or profitable for a client's or prospective client's portfolio, thus, investments may result in a loss of principal. Accordingly, no client or prospective client should assume that the presentation (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from LCG or from any other investment professional.

You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

The information provided is based on current laws, which are subject to change at any time. Lucia Capital Group is not affiliated with or endorsed by the Social Security Administration or any government agency.

Social Security rules can be complex. For more information about Social Security benefits, visit the SSA website at, or call (800) 772-1213 to speak with an SSA representative.

S&P 500 Index is an unmanaged index and includes a representative sample of large-cap U.S. companies in leading industries. An investment may not be made directly in an index.

Examples cited are hypothetical, are for illustrative purposes only, are not guaranteed and subject to potential federal and state law amendments. There is no guarantee that you will achieve the results discussed or illustrated.

Rick Plum is a registered representative with, and securities and advisory services offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. The investment professionals are affiliated with LPL Financial and are conducting business using the name Lucia Capital Group, a separate entity from LPL Financial.

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