Do You Really Need a Financial Advisor? The Truth About Managing Your Own Investments

Many people believe that hiring a financial advisor is essential for making good investment decisions. This myth has been reinforced by decades of marketing from financial advisory firms, but the truth is, many investors who manage their own money often achieve better results than those who rely on advisors—without fees eating into their returns.

If you're wondering whether or not you truly need a financial advisor to succeed in investing, consider these critical points.

1. Financial Advisors Don’t Try to Beat the Market

A common misconception is that financial advisors are skilled stock pickers who aim to outperform the market. However, beating the market is not a financial advisor’s job.

Instead, financial advisors primarily serve as coaches and counselors who:

✅ Help set financial goals.

✅ Keep you from making emotion-based decisions.

✅ Guide you through market downturns and uncertainty.

While this hand-holding can be valuable for some investors, you must decide if it's worth paying an annual fee of 1% (or more) of your portfolio.

Why Don’t Financial Advisors Beat the Market?

Financial advisors operate under strict regulations that limit them from using many high-performance investment strategies. They are encouraged to use ultra-diversified portfolios, which tend to mirror the market’s performance rather than exceed it.

Additionally, the Efficient Market Hypothesis (EMH), which suggests that no one can consistently beat the market, underpins the financial industry’s core philosophy. Many advisors follow this theory and build portfolios that track the market rather than outperform it.

So, if financial advisors aren't designed to beat the market, what exactly are you paying for?

2. Financial Advisors Charge You Regardless of Performance

One of the biggest drawbacks of working with a financial advisor is that their fees are based on the size of your portfolio, not on how well they grow your money.

How Financial Advisor Fees Work

Most financial advisors charge an Assets Under Management (AUM) fee, typically around 1% per year.

That means:

💰 If you invest $100,000, you pay $1,000 per year—even if your portfolio loses money.

💰 If you invest $1 million, you pay $10,000 per year—regardless of performance.

This system creates a misalignment of incentives. Financial advisors get paid whether or not they generate good returns, so their primary goal is to keep your money under their management rather than maximize your wealth.

Are There Performance-Based Financial Advisors?

Some advisors operate on a performance-based fee structure, where they only take a percentage of your profits. However, these types of advisors are rare and usually cater to high-net-worth individuals.

For most investors, paying a 1% fee every year can severely eat into long-term returns.

3. The S&P 500 Beats Most Financial Advisors

If a financial advisor isn’t going to beat the market, why not just invest directly in the market yourself?

The Power of Investing in the S&P 500

The S&P 500 index (which tracks the 500 largest U.S. companies) outperforms most financial advisors over time.

Example: Financial Advisor vs. S&P 500

Let’s compare investing $100,000 with a financial advisor vs. putting it into an S&P 500 ETF (like SPY or VOO).

Over 20 years, the investor who simply bought and held an S&P 500 ETF ended up with $115,000 more than the investor paying for financial advice.

Why Do Financial Advisors Underperform?

1. Diversification Dilution – Advisors spread your money across too many assets, reducing potential gains.

2. Regulatory Restrictions – Advisors are limited in what they can recommend.

3. Fees Drag Down Returns – Even if an advisor keeps up with the market, their fees reduce your net returns.

If you want to build wealth efficiently, investing in the S&P 500 is a simple, low-cost strategy that beats most financial advisors.

4. Choosing Individual Stocks Can Lead to Even Higher Returns

While investing in the S&P 500 is a great strategy, some of the world's most successful investors—like Warren Buffett, Peter Lynch, and Charlie Munger—have built their fortunes by picking individual stocks.

How to Invest Like Buffett (Without an Advisor)

Unlike financial advisors, individual investors are not restricted by SEC regulations. This means you can:

✅ Identify undervalued companies with strong long-term potential.

✅ Buy stocks when they are discounted due to temporary market fluctuations.

✅ Hold your investments for years or decades to maximize growth.

This value investing strategy has created more millionaires and billionaires than any other investing approach.

Real-World Example: Apple (AAPL)

Imagine you invested $10,000 in Apple stock in 2005 instead of paying a financial advisor.

• In 2005, Apple traded at around $2.50 per share (adjusted for splits).

• By 2024, Apple is trading at over $180 per share.

• Your $10,000 investment would be worth over $720,000 today.

Would a financial advisor have recommended Apple? Probably not—because they are often restricted from concentrating investments in high-growth companies.

This is why managing your own investments can be so much more rewarding.

Should You Ditch Your Financial Advisor?

Financial advisors have their place, especially if you:

✅ Need help with estate planning, tax strategies, or retirement planning.

✅ Want guidance to avoid emotional investment decisions.

However, if your goal is long-term wealth building, you don’t need a financial advisor to:

🔹 Invest in the S&P 500 and let compound growth work for you.

🔹 Pick high-quality individual companies and invest for the long term.

🔹 Avoid paying high fees that eat into your returns.

How to Start Investing Without a Financial Advisor

1️⃣ Open a brokerage account with platforms like Fidelity, Charles Schwab, or Vanguard.

2️⃣ Invest in Your Own Education First – Take control of your financial future by learning how to invest your own money. Our 3-day investing workshop is the best way to get started. 

3️⃣ Research individual companies and buy when they’re undervalued.

4️⃣ Hold your investments long-term and avoid emotional decisions.

By taking control of your investments, you eliminate unnecessary fees, gain full transparency over your money, and have the potential to outperform most financial advisors.

Final Thoughts: Take Charge of Your Financial Future

Financial advisors aren’t bad—but they aren’t necessary for successful investing.

Key Takeaways

✅ Financial advisors don’t try to beat the market—they focus on coaching.

✅ They charge fees regardless of performance, reducing your long-term gains.

✅ The S&P 500 outperforms most financial advisors over time.

✅ Investing in individual companies can yield even greater returns.

✅ Managing your own investments can save you thousands in fees and put you in full control.

Want to learn how to invest without a financial advisor? Join our investing workshop and take the first step toward financial independence.