Ask your financial advisor: “What can you do for me?” As he/she flounders to come with a response, you’ll both know it’s time to cut the cord.
Fourteen years ago, I began investing. Because of this, I considered becoming a financial advisor when I grew up. But, as I went through college, interned at a top-tier brokerage firm, met with countless current advisors, studied for the exams, and watched job offers come in, I forgot to ask myself one basic question: Who needs a traditional financial advisor?
It’s funny how we can become so wrapped up in completing a goal that we forget to ask if the goal is even worthwhile. It’s like that line in the movie “Jurassic Park” where Ian Malcolm refers to the creation of dinosaurs on the island and says: “Yeah. Yeah. But your scientists were so preoccupied with whether they could that they didn’t stop to think if they should.”
The semester before I graduated college, I rejected every job offer I received to join a financial advising firm. Why? Because I didn’t feel like encouraging people to pay me for such a silly service.
Why I Don’t Believe We Need Traditional Advisors
With the power of the internet, people simply don’t need local advisors. I’ve networked with a lot of these talented salespeople and the game is all about getting people to buy into their products. I, however, could never charge people for a service they could get far cheaper — and ultimately better — from Vanguard or a similar online brokerage firm. These online firms cut out the middleman and get the average investor amazing no-load funds with insanely low expense ratios. I do all my investing through Vanguard. And I would feel bad accepting any client simply because there’s a smarter option for them out there.
The Cost Savings
By using Vanguard or a similar company, not only are you getting great funds, but all associated costs are cheap. Moving my money out of American Funds and into Vanguard Index Funds will save more than $450,000 over my lifetime in fees alone. Watch advisors squirm in this NPR documentary (52 entertaining minutes) as advisors answer what use they are to investors. The high fees American Funds and other traditional mutual fund companies charge is where advisors get their commissions. You don’t need to pay these.
I don’t know if this still goes on, but Edward Jones would notify its advisors each week on what products to push to clients. This would be regardless of what the client actually needs. I imagine a sample Monday morning call going something like this:
Edward Jones District Rep: Hey Jim! I want you to sell annuities this week. Who cares about the clients’ needs; we need to get this product moving!
Edward Jones Financial Advisor: Sure thing, if it makes me more money!
That’s about as disgusting as it gets, if you ask me.
The Touchy-Feely Defense
Dave Ramsey and others love to use the touchy-feely defense: “You need a financial advisor — someone who will keep your finances on track. When you’re scared and want to sell, you can sit down with your advisor and he’ll calm you down.” What a load of nonsense.
I love how Ramsey gets paid for each financial advisor he recommends. One night, I met with a member of his advisor army. The guy was conducting practices Ramsey has spoken very strongly against (a fixed-percent management commission, for one). Meanwhile, Ramsey had run a radio ad singing the praises of this particular advisor. After talking with the advisor for a while, he told me he had never even spoken to Ramsey before.
So, Ramsey is getting paid to endorse a financial advisor he’s never met and conducts practices against his beliefs. Cute, isn’t it?
How to Fire Your Financial Advisor
Okay, so I’ve had three financial advisors and they are all gone now. The first one strongly encouraged me to get into a terrible mutual fund when I was young (my fault too but there’s a bigger story there), so I left him mainly for that reason. The second one told my parents to buy an annuity for me when I was one year old and also advised them to buy a whole life insurance policy while they were at it! So I fired him out of resentment for those acts. Also, one time he couldn’t answer a simple question I asked and instead replied: “You should be doing my job.”
My last advisor, I left when I was about 20. He was with Edward Jones. Here’s how I fired him in under three seconds. I asked him one question: “What can you do for me?”
At first, he was silent and then he rambled a bit about the great, late Edward Jones. Then, he basically said he couldn’t do anything for me I couldn’t easily do for myself. BOOM. Fired.
Ask your advisor: “What can you do for me?” This way, they essentially fire themselves.
What You Should Do Next
1) Fire your advisor and invest through Vanguard. Related Article: My Lazy Investment Portfolio: Where and How Much I Invest
2) Keep investing without an advisor and give yourself a huge self-high-five for bein’ awesome!
3) Start investing if you haven’t already because you need to start as young as possible. Related Article: Become a Multimillionaire by Fully Funding Your Roth IRA
Human Contact Is Still Awesome
Humans are awesome, no doubt. I love a comforting human voice to assure me my money is safe. I have worked with Vanguard, Fidelity, and TD Ameritrade extensively and their non-commissioned, modern-day advisors are fantastic! When I first started working with them, I asked a few questions I knew the answers to — as to build a rapport and trust. Then, I asked them some tough questions I didn’t know about. Everyone has been so great. But, in all reality, I really don’t need to talk with them often.
Also, the internet is more knowledgeable than any person can ever be. Seriously. Heck, I only go see my doctor now to have him confirm my results from WebMD — so far WebMD and I have been right every time! But if you ever get lazy and want to ask a real human a question instead of searching online, the online brokerage firms have people to help.
Remember, as a person’s net worth grows and investments become more complicated, professional accountants and attorneys might be beneficial to have involved in one’s finances.
Want to learn more about Edward Jones and Vanguard? See our article, Edward Jones vs Vanguard.