If I offered to trade you $1,000,000 tomorrow for $1,000 cash today, would you do it?  How about only $100,000 for $1,000?  $10,000?  $2,000?

Only you can answer these questions for yourself.  We can tell you, however, that it is not out of the ordinary to pay between $1,000 and $20,000 (depending on your wealth and the complexity of your situation) for a professional financial plan, nor is it out of the ordinary for that plan to help enable you to accomplish many of your life goals and help improve your lifetime financial position.  In more practical terms, what if you were able to enjoy your remaining lifetime and create additional enjoyment for your children and grandchildren as well... would that be worth a very, very small fraction of the money that an advisor would help you create, enabling you to make that enjoyment a reality?  A good advisor should be able to demonstrate the potential value that they can bring to your particular situation.

On the flip side, you should be wary of an advisor that offers to provide "free" financial planning when you allow them to invest your money for the following reasons:

1. An advisor that has spent considerable time, effort and money to attain a high level of knowledge and competence would reasonably expect to be compensated for that effort.  If someone is willing to give away their work for nothing, it probably means they haven't put in the same level of effort and therefore doesn't have the same degree of competency.
2. If they're not confident enough that people would be willing to pay for the "planning" that they can do, they're probably right.  But people who value their future and their hard-earned money do pay every day of the week for planning that brings real value to their life .
3. If you found out you had cancer, you would want the best surgeon you could find that would give you the highest chance of survival, not the one that would "throw in the surgery" if you would agree to become a new patient.  Likewise, you should focus more on the potential outcomes that an advisor can bring to your life rather than just their fees.  As the old saying goes, you get what you pay for - and in this case you get what you don't pay for too.
4. It doesn't make logical sense.  After going to school or learning a trade so you can provide a better life for you and your family, imagine going to to work and telling your boss "No thanks, I don't need, want or deserve my bonus or overtime pay.  Just give me my regular wage and we'll call it even."  You would want every penny and promotion that you were entitled to because you had earned it, and your work would be far superior to those who had not.

There is a growing body of research over the last couple decades that reveals two very important facts:

1. Most DIY investors do a very poor job meeting their retirement and other financial goals.¹
2. Working with a financial advisor can add 2-5% per year to your returns² or generate nearly 23% more certainty-equivalent retirement income.³

If this is true, then why in the world do most people not work with an advisor???  The answer likely lies in the misconception about what a financial advisor does, and how they may able to help you achieve better results than you can get on your own.

Many people are under the false impression that a financial advisor's role is to help you invest your money.  While that is a part of what an advisor can do for you, it's certainly not all or even the most effective thing.  Planning accounts for a potential increase in return of 1.5%-3.5% whereas investment management accounts for only around 1.5%.²  You see, this added value isn't due to an advisor being that much better than you at choosing investments.  The reality is that the knowledge that an advisor brings to the table is able to help you make relatively minor changes that can potentially radically alter the trajectory of your financial position over time:  

The important takeaway is that, of the added value that working with an advisor can bring, only about 25% of it comes from investment management whereas around 75% comes from planning.²  So, if you're only getting investment advice, you're really doing a disservice to yourself by foregoing the bulk of the knowledge, help, and improvement that you could be receiving.  Here is what the research shows are the major areas of added value a financial advisor brings to the table ranked in order.  Each study showed slightly different results but here is the general consensus.

¹ Quantitative Analysis of Investor Behavior, DALBAR, ©2023.

² Putting a value on your value: Quantifying Vanguard Advisor's Alpha^®, The Vanguard Group, Inc., ©2019     /     29 C.F.R. 2550 (2011). Regulatory Impact Analysis     /     Your Value is in the Numbers, Russell Investments, ©2023     /     Advice Matters, The Pacific Financial Group, 2020     /     Advice seekers retire with 79% more money, MarketWatch, May 22, 2014     /     Help in Defined Contribution Plans: 2006 through 2012, financial engines^® and AON Hewitt, May 2014     /     Capital Sigma: The Advisor Advantage, Envestnet PMC, ©2019

³ Alpha, Beta, and Now...Gamma, David Blanchett, CFA, CFP^® and Paul Kaplan, Ph.D., CFA, Morningstar Investment Management, August 28, 2013

*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.  

*Asset allocation does not ensure a profit or protect against a loss.

*Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.