The idea that you must work with a financial advisor to make successful decisions about investing and money is a big fat myth. One that is perpetuated, of course, by the financial services industry.
The reality is, if you learn how to manage your own money, you can achieve better results than if you paid someone to do it for you.
And no, you don’t need a crazy high IQ or have some uncanny knack for picking a winning stock or choosing a good property.
Anyone who knows nothing about investing today can learn how to become a smart investor in the future. I did it and if I can do it, so can you!
Here’s why I believe you should take control of your financial future rather than put it in the hands of a financial advisor.
Financial advisors rarely ‘beat the market’
The results of financial advisors who could be considered the cream of the crop are outpaced by the results of index funds more than a whopping 90% of the time.
In 2007 Warren Buffet bet a financial advisor a million bucks that an index fund would outperform a collection of elite hedge funds over the course of 10 years.
A decade later, he collected on the bet.
Simply by staying put with a ‘boring’ low-cost stock index fund, even during the 2008 stock market crash, Buffett’s investments beat elite advisors. No special talent is required.
You can do the same thing.
On a side note, the real winner of this bet was the charity, Girls Inc, to whom Buffet donated the million dollars!
Financial advisors don’t help you beat the market with their investing knowledge.
In most cases, they act more like a financial coach, someone to hold your hand through the investing process and persuade you not to lose your cool and make decisions based on emotions during rough times.
That’s great and all, but is the money you pay them in fees really worth that support?
Over time, you could be paying hundreds of thousands of dollars from your retirement fund to have them ‘help’ you.
Putting your money in an index fund like the S&P 500 and letting it do its thing will, in most cases, earn a higher return for you than paying your financial advisor to call the shots.
You have to pay their fees – whether they make you money or not
The fees you pay your financial advisor are based on how much money you invest, not on the results they deliver – aka how much money they make you.
It’s a pretty strange system when you think about it.
Even if your entire portfolio tanks due to their investment strategy, you still need to fork over the cost of the fees to pay them for some terrible decisions!
The high fees of financial advisors take a big chunk of cash away from your investment pot.
Their fees are costing you big time and ironically, this is one of the reasons why managed portfolios rarely outperform index funds! If you want a mathematical explanation of the impact of advisor fees on your future wealth, check out Tony Robbins’ book “Unshakeable’. In this awesome book, he spends the first 92 pages outlining exactly what I am saying in this post.
Once financial advisors subtract their fees, your returns will be less than they could have been had the money for the fees been invested.
Obviously, I can’t speak for the integrity of all financial advisors, but if you’re getting paid the same whether you do a stellar job for your client – or lose half their portfolio – there doesn’t seem to be a great incentive to strive for the first option.
Many financial advisors are interested in what’s going to happen over the next quarter and the next 12 months, more so than what is going to be happening a decade down the track.
Some also have issues with conflicts of interest, because they sell highly commissioned products and will often steer you towards those options so they can hit their sales quotas.
Do you really want to be part of this crazy system?
Take control of your own money and investments – you can do it!
We can see how by simply putting your money into an index fund like S&P 500 you can beat the returns of a financial advisor over time – but there’s an even better option.
Learning how to invest in the right individual stocks, property, and cash-based investments is what will really accelerate your wealth-building over the long term.
And no, it isn’t as hard as you think – or as advisors want you to think!
By investing time and learning how to carefully select the right assets to invest in, you become your own financial manager – minus the fees.
Choosing high quality, individual companies, buying them when they are at an attractive price, and holding them for the long run is the best, time-tested investment strategy out there.
Knowing how to select investment-grade properties, with potential for growth and good rental returns, is not a thing of mystery. You can do it.
This means you can save and hold your cash until the best opportunities come up – your financial advisor can’t do this.
Regular people (yep, I’m looking at you) who put in the time to learn how to choose a few solid companies and have the patience to ride the tide of the market, instead of trying to time it, can build incredible wealth.
It’s entirely possible to outpace index funds over time by making smart investments in individual companies. All without the help (or fees!) of a financial advisor.
Think you can do it? I know you can!