If you’re asking, “Should I invest myself or hire someone?” you may already have some level of comfort with financial decisions. But even so, this is an important choice that can affect your financial future, influencing not just your returns but also how much time and effort you need to put in to come out ahead. With so many options—from DIY investing to professional financial advisors—it’s essential to weigh the pros and cons before you decide.
Figuring out when to go solo versus bringing in a professional comes down to matching your strategy with your personal goals. Managing your own investments gives you control and could save you money, while a financial advisor offers expertise and peace of mind.
In this article, we'll guide you through the factors to consider so you can choose the approach that best suits your financial needs and lifestyle.
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Should I hire a financial advisor or go it alone?
Investing on your own means you’re in charge of all your financial decisions—from choosing assets to deciding when to buy or sell. On the other hand, hiring a financial advisor means paying someone to guide your investments, give expert advice, and manage your portfolio. So, what’s the best way to go?
Interestingly, only 35% of Americans currently work with a financial advisor, which shows that many people choose to handle their finances on their own. However, despite this trend, the demand for financial advisory services is expected to grow, with the market projected to reach $146.8 billion by 2033.
This growth reflects an increasing recognition of the value advisors bring, particularly in complex areas like tax planning and investment diversification. For those without the expertise, working with an advisor can help avoid missed opportunities and create more effective investment strategies.
Let’s dive into the pros and cons of managing your investments yourself vs hiring a financial advisor, so you can make the best choice for your situation.
DIY investing
Is it better to invest yourself? Depending on your priorities, it might be. Investing on your own offers several benefits, like being able to customize your strategy and save money by skipping advisory fees. Plus, it’s a good way to learn about financial markets and build confidence in managing your money.
But it also has its downsides. DIY investing can be time-consuming, as it requires you to stay on top of market trends and your portfolio. Without a pro to guide you, you might make emotional decisions, like panic selling, and miss out on advanced strategies that could boost your returns.
Pros of DIY investing:
- Flexibility to customize your investment strategy
- Potential cost savings by avoiding advisory fees
- Opportunity to learn about financial markets and build confidence
Cons of DIY investing:
- Time-consuming, requiring ongoing market and portfolio monitoring
- Risk of making emotional decisions without professional guidance
- Possible missed opportunities for advanced strategies and insights
Hiring a professional
Is it worth it to pay someone to manage your money? Hiring a financial advisor comes with several benefits. You get expert advice, access to advanced tools, and personalized strategies that fit your financial goals. Plus, advisors handle the day-to-day management of your investments, which can save you time and reduce stress.
However, there are downsides to consider. The cost of hiring an advisor—typically around 1% of your assets—can eat into your investment returns over time. You might also have less control over individual investment decisions, as the advisor manages the portfolio according to their own approach.
Pros of hiring a financial advisor:
- Expert advice and experience
- Access to advanced tools and resources
- Saves you time and effort
- Personalized strategies for your goals
Cons of hiring a financial advisor:
- Advisor fees can reduce your returns
- Less control over specific investment choices
6 tips for choosing the right option
When deciding whether to hire someone to invest for you or invest on your own, it's essential to weigh various factors that can influence your decision.
1. Assess your financial knowledge and experience
Anyone wondering, “Should I hire a financial advisor or go it alone?” should start by assessing their understanding of financial markets and investment principles. If you feel confident in your knowledge and experience, DIY investing could be a good fit. But if you're unsure, getting guidance from a professional might be a smart move.
2. Evaluate your available time
Consider how much time you can realistically dedicate to managing your investments. If your schedule is already packed, or if you lack interest in tracking the markets, hiring an advisor might be worth it to you.
3. Consider your financial goals
Your financial goals—whether they're long-term growth, retirement planning, or preserving wealth—will also influence your decision. If your goals are complex, such as transitioning to retirement or managing a significant portfolio, professional advice might benefit you.
4. Understand the costs
While DIY investing might save you money in fees, it could cost you time and potential missed opportunities. On the other hand, the average fee for a financial advisor typically falls around 1% of assets under management (AUM) per year.
For example, with a $500,000 portfolio, you would typically pay around $5,000 annually in advisory fees at a 1% rate. This percentage-based fee model is the most common approach used by financial advisors. That said, typically you can expect to see higher than 1% returns on your investments, so you’re still likely making money.
In addition to AUM fees, some advisors may charge flat fees for specific services like financial planning, or hourly rates per hour depending on the advisor's experience and location. When selecting an advisor, be sure to ask about all possible fees.
5. Reflect on your risk tolerance
If you're uncomfortable with high-stakes decisions and prefer a hands-off approach where a professional manages the complexities, hiring an advisor might be the better choice.
6. Check the expert’s approach
Before answering the question, “Is it better to have someone invest for you?” you should understand the advisor's approach. This will help you assess if their methods align with your financial goals and risk tolerance.
Get insight into their investment philosophy and strategies by asking how they handle risk management and diversify portfolios, and what their long-term investment outlook is.
It’s also important to learn how they respond to market volatility. Do they adopt a conservative stance or take a more aggressive approach to seek higher returns? Knowing their strategy during different market conditions can help you decide if their style fits your needs.
Check out their track record too. See how they’ve performed and adapted in various market scenarios. Finally, think about their communication style. Ask how often they update clients and how accessible they are for questions. Good communication is key to making sure you’re comfortable and informed about your investments.
Here's when it makes sense to hire a financial advisor
Deciding to hire someone to invest for you can be a smart move—especially in certain situations where professional guidance is invaluable. But at what point is it worth getting a financial advisor?
Here are some key scenarios where hiring a financial advisor might be the best choice:
- Complex financial situations: If you’re dealing with complexities like managing an inheritance, retirement planning, or tax strategies, a financial advisor can provide the expertise you need.
- Limited time or interest: If you’re short on time or uninterested in daily market monitoring, an advisor can handle the details, letting you focus on other priorities.
- Need for expertise: If you’re not confident in your investment skills, a financial advisor’s expertise can help optimize your financial outcomes.
Can I start with a financial advisor and then take over my investments later?
Yes, you can hire someone to invest for you to build a strong foundation and later transition to managing your investments on your own. This approach lets you benefit from professional guidance initially while you gain confidence and knowledge. Once you're ready, you can take full control of your investments. Just make sure to stay informed about market trends and adjust your strategy as needed.
How to find the right financial advisor for your needs
Choose one that aligns with your financial goals. Evaluate their fee structure, areas of expertise, and credentials. Look for advisors who are fiduciaries, meaning they are legally obligated to act in your best interest. Additionally, you can ask for client references and verify their credentials through organizations like the CFP Board or FINRA. Interviewing multiple advisors will help you find the best match for your specific financial needs.