Do You Really Need a Financial Advisor? The Truth About Managing Your Own Investments

Many people believe that hiring a financial advisor is essential for making good investment decisions. This myth has been reinforced by decades of marketing from many financial advisors, but the truth is, many investors who manage their own money often achieve better results than those who rely on advisors, without fees eating into their returns or jeopardizing their financial future.

If you're wondering, “Do I need a financial advisor to secure my financial future and reach my long term goals?”, consider these critical points as you develop your own financial plan.

1. Financial Advisors Don't Try to Beat the Market

A common misconception is that financial advisors are skilled stock pickers who aim to outperform the market. However, beating the market is not a financial advisor's job.

Instead, financial advisors primarily serve as coaches and counselors who:

✅ Help set financial goals and provide personalized guidance.

✅ Keep you from making emotion-based decisions with behavioral coaching.

✅ Guide you through market downturns and uncertainty.

While this hand-holding can be valuable for some clients, you must decide if it's worth paying an annual fee of 1% (or more) of your portfolio for these services.

Why Don't Financial Advisors Beat the Market?

Financial advisors operate under strict regulations that limit them from using many high-performance investment strategies, including advanced portfolio management and asset location techniques. They are encouraged to use ultra-diversified portfolios, which tend to mirror the market's performance rather than exceed it.

Additionally, the Efficient Market Hypothesis (EMH), which suggests that no one can consistently beat the market, underpins the financial industry's core philosophy. Many financial advisors follow this theory and build portfolios that track the market rather than outperform it, regardless of market conditions.

So, if financial advisors aren't designed to beat the market, what exactly are you paying for? Often, it's advice, guidance, and serving as a sounding board for your financial decisions.

2. Financial Advisors Charge You Regardless of Performance

One of the biggest drawbacks of working with a financial advisor is that their cost is based on the size of your assets, not on how well they grow your money or investments.

How Financial Advisor Fees Work

Most financial advisors charge an Assets Under Management (AUM) fee, typically around 1% per year.

That means:

If you invest $100,000, you pay $1,000 per year—even if your portfolio loses money.

If you invest $1 million, you pay $10,000 per year—regardless of past performance.

This system creates a misalignment of incentives. A certified financial planner gets paid whether or not they generate good returns, so their primary goal is to keep your money under their management rather than maximize your wealth.

Are There Performance-Based Financial Advisors?

Some advisors operate on a performance-based fee structure, where they only take a percentage of your profits. However, these types of advisors are rare and usually cater to high-net-worth individuals. If you're looking for a fee only advisor or a certified financial planner, always ask about their fee structure and services.

For most investors, paying a 1% fee every year can severely eat into long-term returns and erode your confidence in your financial plan.

3. The S&P 500 Beats Most Financial Advisors

If a financial advisor isn't going to beat the market, why not just invest directly in the market yourself?

The Power of Investing in the S&P 500

The S&P 500 index (which tracks the 500 largest U.S. companies) outperforms most financial advisors over time.

Example: Financial Advisor vs. S&P 500

Let's compare investing $100,000 with a financial advisor vs. putting it into an S&P 500 ETF (like SPY or VOO).

Over 20 years, the investor who simply bought and held an S&P 500 ETF ended up with $115,000 more than the investor paying for financial advice.

Why Do Financial Advisors Underperform?

• Diversification Dilution – Advisors spread your money across too many assets, reducing potential gains and complicating asset location strategies.

• Regulatory Restrictions – Advisors are limited in what they can recommend, which can impact tax loss harvesting and insurance planning.

• Fees Drag Down Returns – Even if an advisor keeps up with the market, their fees reduce your net returns.

If you want to build wealth efficiently, investing in the S&P 500 is a simple, low-cost strategy that beats most financial advisors. It allows you to feel confident about your financial future through more control over your finances and assets.

4. Choosing Individual Stocks Can Lead to Even Higher Returns

While investing in the S&P 500 is a great strategy, some of the world's most successful investors—like Warren Buffett, Peter Lynch, and Charlie Munger—have built their fortunes by picking individual stocks and understanding their own risk tolerance..

How to Invest Like Buffett (Without an Advisor)

Unlike financial advisors, individual investors are not restricted by SEC regulations. This means you can:

• Identify undervalued companies with strong long-term potential.

• Buy stocks when they are discounted due to temporary market fluctuations or turbulent times.

• Hold your investments for years or decades to maximize growth even until retirement.

This value investing strategy has created more millionaires and billionaires than any other investing approach. However, it’s important to avoid the mistake of emotional decision-making or chasing trends without research.

Real-World Example: Apple (AAPL)

Imagine you invested $10,000 in Apple stock in 2005 instead of paying a financial advisor.

• In 2005, Apple traded at around $2.50 per share (adjusted for splits).

• By 2024, Apple is trading at over $180 per share.

• Your $10,000 investment would be worth over $720,000 today.

Would a financial advisor have recommended Apple? Probably not, because they are often restricted from concentrating investments in high-growth companies.

This is why managing your own investments can be so much more rewarding. It can help you manage your portfolio with a strategy that fits your goals for life and retirement.

Should You Ditch Your Financial Advisor?

Financial advisors have their place, especially if you:

• Need a financial expert with estate planning, tax strategies, or retirement planning.

• Want guidance or a complimentary consultation to avoid emotional investment decisions.

However, if your goal is long-term wealth building, you don't need a financial advisor to:

• Invest in the S&P 500 and let compound growth work for you.

• Pick high-quality individual companies and invest for the long term.

• Avoid paying high fees that eat into your returns and finances.

How to Start Investing Without a Financial Advisor

• Open a brokerage account with platforms like Fidelity, Charles Schwab, or Vanguard.

• Invest in Your Own Education First – Take control of your financial future by learning how to invest your own money. Our 3-day investing workshop is the best way to get started .

• Research individual companies and buy when they're undervalued.

• Hold your investments long-term and avoid emotional decisions.

By taking control of your investments, you eliminate unnecessary fees, gain full transparency over your money, and have the potential to outperform most financial advisors. This approach can empower you to manage your finances for your business, your family, and your future.

Final Thoughts: Take Charge of Your Financial Future

Financial advisors aren't bad—but they aren't necessary for successful investing. In fact, many clients find that taking charge of their own investments and money helps them stay focused on their financial goals.

Remember, you don’t always need a financial advisor to develop a strong financial plan or seek reliable investment advice. Sometimes, the best results come from empowering yourself with knowledge and commitment.

Key Takeaways

✅ Financial advisors don't try to beat the market—they focus on coaching.

✅ They charge fees regardless of performance, reducing your long-term gains.

✅ The S&P 500 outperforms most financial advisors over time.

✅ Investing in individual companies can yield even greater returns.

✅  Managing your own investments can save you thousands in fees and put you in full control over your money.

Want to learn how to invest without a financial advisor? Join our investing workshop toward confidence and take the first step toward a secure financial future for you and your business.