Why You Should Break Up with your Financial Advisor

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Last updated December 1, 2020

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May 13, 2015

Simple. Thrifty. Living.

Most Americans are concerned about their savings. They want to be reassured that they have sufficient funds in their retirement accounts, emergency funds, and investments. 

Those concerns were substantially heightened after the economic downturn of 2008. Millions of soon-to-be retirees saw their retirement accounts shrink, with some being completely wiped out. Those concerns created a new market for financial advisors, professionals who offer advice on investing for the right price. However, are those services actually worth what financial advisors typically charge for them? Is it really necessary to pay a financial advisor, or are there more cost-effective alternatives?

There are different types of financial advisors, and they charge differently for their services. Some work by an hourly rate, which can run as high as $500 an hour to create a basic financial plan.

Others charge a flat annual fee, typically about 1% of the total accounts they manage. For a retiree with $500,000 in total assets, that’s comes out to hefty $5,000 a year. And some charge additional fees for commissions. But what do you get for your money, and can you get the same, or better results, elsewhere for less?

The simple answer is “yes.” Most retirees have relatively uncomplicated retirement plans, like the 401(k). Many of these plans offer investors options like target date funds, which will automatically redistribute assets more conservatively the older you get, creating increasingly less risk.

Also, an increasing number of 401(k) plans give investors access to a host of free online tools to help them make prudent financial decisions. Many also offer free online support to help investors with specific questions and concerns. For example, companies such as and  TD Ameritrade offer straightforward management of retirement accounts for little to no cost. 

Unless your investment portfolio is very large or complicated, you can probably manage your assets with the tools your retirement account offers, without the help and substantial cost of a financial advisor. But that doesn’t mean you should simply ignore your investments.

There are plenty of online tools at your fingertips, but you have to make use of these and pay close attention to the advice you receive. And you still have to monitor your investments on a regular basis.

That means keeping an eye on changing market conditions, like occasional wild swings in the stock market. And it means keeping your emotions in check to avoid imprudent decisions when those swings occur. If you are looking for a more comprehensive approach to money management, consider LearnVest, an online tool that puts your money plan into action. 

If you already have a financial advisor or are considering hiring one, take the time to examine exactly what they’re giving you for your money, and whether those same services are available elsewhere for less money, or for free. Before you sign on the dotted line, check with someone at your retirement account who can help you decide what option is best for you.

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