28 February 2018
/
Personal Finance
Do you
really need a financial advisor?
It’s been nearly 27 years since the
World Wide Web went live to the general public — that’s more than a
quarter century of virtually unlimited, free information at our
fingertips. In the years since, we’ve made even further technological
strides, allowing information and innovative new tools to be
increasingly accessible and available on-the-go.
So why — 27 years later — do we continue
to rely so heavily on financial advisors? Especially when only 2
percent of Americans report they truly trust their advisor in the
first place[1]. There tends to be this
conception that while you can do it yourself, you’ll miss out on the
expertise and time-saving benefits of financial advisors if you do.
But here’s the thing: “do it yourself”
investing isn’t just a viable alternative when it comes to managing
your money — it’s almost always the better alternative. Think of it
like this…
When you begin your search for a
financial advisor, you’ll almost universally receive one piece of
advice: use a fiduciary. Why? Because fiduciaries are legally bound to
put your needs before their own. But the reality is, that’s difficult
to assess and more difficult to enforce[2].
Regardless of the rules, financial advisors still need to make money.
And at the end of the day, the person who most understands and acts in
accordance with your best interests is you.
Taking control of your own finances
doesn’t just allow you to save money, it offers the opportunity to
ensure your portfolio is completely tailored to your risk tolerances,
preferences, and financial goals — because you know yourself better
than anyone else, and because new technologies mean you don’t have to
be an expert to do it.
Expertise
Investment expertise is no longer walled
off as it once was. It’s out there, and it’s free.
Twenty years ago, for example, the
individual investor often turned to financial advisors to access
best-in-class investment portfolios. Today, that information is both
publicly available and distributed free of charge, accessible to all
investors rather than only to those with large sums of capital.
You no longer need a financial advisor
to invest in a passive portfolio that aligns with your risk tolerance.
We offer that, and it’s free. You no longer need to meet a capital
minimum to match the investment strategy of some of the world’s
greatest investors. We offer these, and they’re free. You can rely on
expertly curated portfolios or do your own research to build a
portfolio entirely unique to you. We offer more than 6,000 stocks and
ETFs, and hundreds of Expert Pies for you to pick from, and they’re
all free.
The bottom line? Don’t let industry
jargon fool you into thinking that building wealth is more complicated
than it is. With the right tools, you can manage your finances more
efficiently and effectively than an advisor.
Time commitment
Financial advisors long touted another
key advantage to using their services: they would take manual
activities such as balancing off your plate to free up your time. But,
once again, new financial technologies like M1 render this value
proposition obsolete, automating traditionally time-consuming
processes to make investing simple and convenient for everyone at
lower costs or no costs. M1 rebalances your portfolio automatically,
so your money intelligently flows into your investments in line with
your target asset allocation. And since our intelligent automation
takes humans out of the equation, this rebalancing can take place on a
moment’s notice, without costing you a dime.
M1 also buys and sells securities on
your behalf, so you won’t need to spend hours placing manual trades
every time you rebalance or deposit money. This way, you maintain full
control over where your money is invested without the time commitment.
Simply select your investments and our intelligent automation takes
care of the rest, so you enjoy the time-saving perk of financial
advisors without the hefty price tag.
And at the end of the day, mobile
investing platforms are available anytime, anywhere. Sure, you could
give your financial advisor a call to check in on performance, but
they’re probably too busy on the golf course with another client to
take your call. With M1, monitoring your portfolio’s performance or
making adjustments to your holdings is as quick and simple as the
touch of a button.
Cost
Whether charging commissions, fees,
hourly rates, or retainers, financial advisors can get very expensive
very quickly. Even seemingly small fees can dramatically reduce your
long-term returns. In fact, the Department of Labor reported even a 1
percent fee can slash your earnings by 28 percent over 35 years[3],
stunting your ability to maximize wealth building potential or
retirement savings.
Even if your investment horizon is
significantly shorter than 35 years, that 1 percent fee constitutes a
substantial portion of your returns. If your portfolio earns just 5
percent returns, for example, your advisor collects a whopping 20
percent. And while you sacrifice a significant chunk of your positive
returns, you’re still the one taking on all the risk — and you’ll pay
your advisor even when your portfolio tumbles.
More concerning still, costs are rarely
transparent and often leave you in the dark as to where your money is
going[4].
Certain fee structures may even place
your best interests in direct opposition to that of your advisor.
Commission-based advisors, in particular, may profit off churning your
investments or pushing you toward certain products or services that
may not align with your financial goals, such as funneling your money
into expensive mutual funds when a low-cost ETF could offer the same
benefits.
Meanwhile, automated alternatives keep
your best interests at the forefront and offer lower-cost (or even no
cost) alternatives for managing your money, making it difficult to
justify funneling your money toward the opaque and potentially steep
costs of hiring an advisor. After all, if you can do it better and do
it for free, why wouldn’t you?
Don’t compromise.
In the past, individual investors either
saved money by managing their own investments or paid for the
expertise and convenience of a financial advisor.
That is no longer the case.
You shouldn’t have to choose between
saving money and making better decisions for your financial future.
And now you don’t.
With the tools and resources available
to today’s investors, presiding over your own finances isn’t just a
cheaper substitute for hiring a financial advisor. Taking control of
your portfolio empowers you to get more from your money and equips you
with the knowledge to continue to build wealth decades into the
future.
You know your financial needs and goals
better than anyone ever will. You have your best interest at heart —
always and without a doubt. All the information you need is now at
your fingertips, and as you continue to invest, you’ll learn more,
care more, be better informed, and begin to enjoy the process.
So don’t compromise, and don’t rely on
someone else to make the right decisions for your financial future.
You can often reap even greater rewards when you invest for yourself.
[1]
American
Association of Individual Investors
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[2] Investment
News
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[3] Department
of Labor
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[4] U.S.
News
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