If you have a well-balanced, diversified portfolio, chances are it was designed to weather the ups and downs of the market. In other words, for most casual investors, your portfolio was created to not need the (potentially costly) help of a hands-on advisor. So, how do you know when you've tipped into situations that warrant professional help? Here's how to decide what's right for you and find quality assistance if needed.
DIY investing brings several advantages:
Lower costs: Most financial advisors charge based on how much money they manage for you, and that fee can range from 0.25% to 1% per year. On a $500,000 portfolio, that could cost you around $1,250-5,000 per year. Over decades, these fees can reduce your returns by hundreds of thousands of dollars (thanks a lot, compound interest).
Simpler options: For most investors, managing your own investments through low-cost index funds is a sufficient approach. A basic three-fund portfolio using low-cost index funds (total U.S. stock market, international stocks, and bonds) provides broad diversification and historically strong returns. This strategy requires minimal time and expertise to implement. If you're using this sort of approach, you probably don't need to pay an advisor to keep an eye on it.
Sense of control: Managing your own investments means maintaining full visibility and control over your money. You can adjust your strategy immediately as circumstances change without going through an intermediary, which can be very appealing. However, let's dig into why this might sound better than it usually plays out in reality.
Consider a financial advisor if you:
Have complex financial needs: Estate planning, tax optimization across multiple accounts, or managing inherited assets require professional expertise. If you're a business owner or a truly high-net-worth individual, odds are you can afford—and will benefit from—comprehensive wealth management.
Lack time or interest: Be honest with yourself. If researching investments and rebalancing portfolios feels overwhelming, an advisor can handle these tasks. The cost may be worthwhile if it prevents analysis paralysis or emotional trading decisions.
Need emotional discipline: Quite frankly, you're never as objective as you think you are. When I spoke with Matthew Chancey, CFP, about what it takes to be an active investor, he explained how you need to "have a higher appetite for risk and be more emotionally fortified than every investor sentiment survey has ever suggested that passive investors can be." Some investors panic-sell during market downturns or chase performance. This is where a good advisor comes in: They can provide behavioral coaching and prevent costly mistakes during volatile periods.
Face major life transitions: On top of emotional discipline, major life transitions come with their own set of financial potholes. During divorce, inheritance, retirement, or career changes, professional guidance can help navigate complex financial decisions and tax implications. Here are more cases of financial milestones that are worth the time and money of a professional.
If you decide to hire help, here's how you can get started.
First things first: Be sure to pay close attention to the difference between fee-based vs. fee-only advisors, as certain financial advisors may not have your best interests at heart. After all, when it comes to finding the right financial planner for you, the last thing you want is to get ripped off. Look for advisors who:
Charge transparent fees (not commissions)
Have a fiduciary duty to put your interests first
Hold respected credentials (CFP, CFA)
Provide comprehensive financial planning, not just investment management
Are willing to explain their approach and fees in detail
For hands-off investing with minimal fees, a robo-advisor could suffice. They can be a great choice for newer, younger investors. But for advanced planning and strategy, a human touch may still be required for advice you can trust.
Digital platforms like Vanguard Personal Advisor Services or Betterment offer a middle ground:
Lower fees (0.20-0.30% annually)
Automated investment management
Basic financial planning tools
Access to human advisors
Good for straightforward situations requiring minimal customization
Most investors are better served by learning basic investment principles and managing a simple portfolio themselves. The money saved on fees can compound significantly over time.
However, if you have complex needs or know you won't stay disciplined without help, working with a qualified advisor can be worthwhile. Choose carefully, understand all fees, and regularly evaluate whether you're getting sufficient value for the cost. For more details about the process of choosing an advisor, check out our guide here.
Remember: Even with an advisor, you should understand your investment strategy and feel comfortable asking questions. The best advisors educate their clients rather than create dependency.
