I very much enjoyed reading, “5 Good Reasons to Hire a Financial Advisor and 2 Bad Ones ” by Average Joe. He wrote:

Most people don’t need a financial advisor.

I’d tell individuals before they hired me that 90 percent of what I did, they could do themselves. My job was to guide them through sometimes stormy financial waters. As a bonus, I’d save them time and money by already knowing tricks they could probably find online. My staff would fill out annoying paperwork, and we had access to the best professionals in related fields. If you needed good advice, I either could provide it or knew how to find it fast.

We say that everything we do you could do for yourself. It is important enough that we think understanding your investment strategy is Safeguard #5 in protecting yourself from predatory advisors. In that article we wrote:

Don’t trust any investment strategy you don’t understand, and don’t trust any advisor who won’t or can’t take the time to explain exactly why and how he or she operates…

Note that I am not advocating “invest in what you know,” which is called familiarity bias and can cause your portfolio to be inadequately diversified. Only investing in what you know may help you avoid some crazy investment schemes, but the resulting concentration can be dangerous in other ways.

Instead, the better rule of thumb is to know what you are investing in, which requires active participation by both you and your advisor.

Here are Average Joe’s 5 Good Reasons To Hire a Financial Advisor:

1. You don’t have time.
2. You aren’t going to look at the stuff yourself.
3. You don’t want a full financial education.
4. You want a smart coach in your corner to steer your plan in the right direction.
5. You want an ally to point out flaws in your strategy.

You could do everything we do if you had our time and expertise. But that would require gaining the expertise to understand and then taking the time to do comprehensive wealth management. We publish much of what we know on our website. We currently have over 1,300 published articles on a vast variety of subjects. We have tried to organize them to help you find the best. Check our our Eureka pages, “Best Of” articles, or our most popular posts.

It also requires ignoring the financial news, not acting emotionally, and staying the course. Our brains are not wired to have the right investing instincts and we have devoted an entire section of our website to Money and the Brain.

In fact, our job is to try to do what you would do if you had our time and expertise. Our job requires navigating clients’ wants and needs to craft a coherent plan. That often requires disagreeing with our clients when they are wrong and educating them as to why. It requires not being emotional in order that our clients might better achieve financial peace of mind.

For all of these reasons, I was glad to see Average Joe’s 2 Bad Reasons to Hire a Financial Advisor:

1. You want someone to do it for you.
2. You want to day trade with a partner.

“You want someone to do it for you” is a bad idea because comprehensive wealth management requires client engagement. We continually ask our clients for information about their lives and goals. We need to know what only they know in order to do what they would do if they had our time and expertise.

That, and nothing less, is a fiduciary standard of care.

Photo used here under Flickr Creative Commons.