Ep 15 - Should You Hire a Financial Advisor? (And 7 Things to Look For If You Do)

Hello, friends.

This is Tyler Gardner, welcoming you to another episode of your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing.

So, let's get started and get you one step closer to where you need to be.

On this week's episode, we're going to address the number one question I get asked about money.

Seriously, I'm not actually exaggerating that.

Should I hire a financial advisor?

And a close second question, if so, what the heck am I supposed to look for in this era of wealth management where everyone and their cousin is calling themselves a financial professional?

To begin, at its core, I don't think that's really the question we're asking.

We're asking if we are on the right track or if we should be doing something differently with our money.

All it ever takes is for us to bump into Shannon down at the grocery store and hear that she's now working with a wonderful new financial advisor who happens to be the son of someone she met down at the pool, instantly we begin to doubt our own course of action and we fear that we might be left behind, especially during times of market volatility.

All of us are constantly sharing one true question.

We want to know if the grass is indeed greener on the other side, and if it is, how the heck do we get there?

Now, as a disclaimer before we start, as is true with all questions relating to a mass audience or to personal finance, the answer is and always will be, it depends.

Additionally, I'm not going to offer you any answers throughout this episode, only more questions to consider.

So if you were looking for my official stamp of approval or condemnation one way or another, It's not happening.

And what might prove useful for you might be a complete waste of time for your neighbor.

I know you hate me so much right now, but bear with me as I promise by the end of this episode, you will have not only a three-step framework to address whether you should work with an advisor, but also the seven things that I personally would look for if I chose to work with an advisor.

And to return momentarily to why I started this podcast, these conversations are extremely nuanced and deserve an extended consideration.

So, sit back or keep driving or keep lifting weights or whatever you're doing while listening, and let's see what clarity we can offer surrounding the choice of whether to work with a financial advisor or not.

Let me frustrate you as early as possible in this episode just to get it out of the way.

Working with an advisor might be one of the smartest moves you will ever make, or it might be one of the most expensive and useless decisions you ever make.

The key is to begin by understanding exactly what you need and what you're capable or not capable of doing on your own.

So as mentioned above, we'll break this episode into two key sections.

First, we'll explore three questions you need to ask yourself to figure out if an advisor is right for you.

And second, we'll explore seven questions that you need to ask an advisor to see if they're the right one to work with you.

When I was a portfolio manager, we used to ask potential clients one question, broken into three parts, to help them decide whether they needed or should work with us.

It's been echoed across every major brokerage firm, not because it's catchy, but because it's true.

Do you have the skill, will,

and time to manage your own money.

Let's explore each one a bit further.

Number one, do you have the skill?

Since Jack Bogle founded Vanguard in the 70s, investing has become, for all intents and purposes, relatively democratized.

With quick access to index funds, ETFs, and free online tools and resources, it's never been easier to build out a decent portfolio based on your risk tolerance and your values.

And yet, many of us still want a second set of eyes.

How do I know this?

Because even current hedge fund managers and investment professionals get in touch with me at times, asking if I'd consider looking over their allocation strategy just to be sure they aren't missing anything.

That's normal.

You're not being insecure.

You're being prudent, as I certainly hope you would be with your investable assets.

I would be way more worried if you went through life not ever wanting someone else to check your work and make sure you were on the right track for you.

Personally, I was lucky.

I learned how to invest across asset classes early in my 20s from top-tier mentors.

Then I read and studied obsessively for two decades and ultimately, as you know, became a portfolio manager.

But I never forget, most of you did not share that path with me.

So returning to beginner's mind matters.

And in today's world of finance influencers and TikTok money experts, and yes, I'm putting experts in quotes, it's really easy to get overwhelmed and it's even easier to be misled intentionally or unintentionally.

My mission is and always has been to teach you enough that you could do this on your own confidently, but I certainly would always suggest, no matter what, that you have someone in your life, personally or professionally, simply to check your work.

Number two, do you have will to do this on your own?

AKA, do you actually want to manage your own money?

If your reaction is, I'd literally rather do anything else, that's your answer.

That's also my mother's answer.

She's very smart, she's very savvy, but when it comes to money, she doesn't want anything to do with it.

So for her, working with someone is a wise decision.

My favorite scene in the movie The Breakup, underrated film by the way, is when Jennifer Anniston asks her partner, played by Vince Vaughan, to help with the dishes, to which he responds by saying he'll do it later or something along those lines.

She says, I want you to want to do the dishes.

And Vince Vaughan replies, why would I want to do the dishes?

Same logic applies to finance.

Personally, I want you all to want to manage your own money.

I want that so badly.

But if you'd rather be on the couch playing video games with Vaughn and and not thinking twice about non-correlated asset classes and how they respond to different market cycles, I get it, and I can't make you want to manage your own money.

So if you have no interest in the process, that's valid, and outsourcing could be a wise move for you.

And number three, do you have the time to do this on your own?

If you've already built a basic plan, investing literally can take an hour a year.

For me, it hasn't even taken an hour a year because I don't touch my investments.

This age-old notion of paying an advisor to watch the markets for you daily and respond accordingly is nonsense at best and dangerous at worst.

As if an advisor really is toying with your portfolio on a daily basis, they're building up transaction costs, they're trying to time the market, which they can't.

and they're simply justifying their fees and putting on a great show for you.

So get rid of the illusion that your advisor is sitting there staring at a Bloomberg terminal waiting to make the appropriate move to your portfolio to make you millions.

In fact, one of the most brilliant investors I ever met who managed billions of dollars for others paid someone to manage his own money because he truly valued spending all of his non-professional time with his family.

He didn't want to ever think about money when he didn't have to be thinking about it.

That's how he measured value.

More time with his family.

So for him, he didn't want to devote the time, nor did he have the desire to do so.

That's your litmus test.

Skill, will, time.

If you're missing one, maybe you need an advisor.

If you're missing all three, I'd say you definitely do.

But now here comes the tricky part.

Once you decide you need an advisor, how on earth do you choose one?

Let's break this section into the seven questions and topics that I would personally address if I were choosing an advisor for myself.

Number one, let's talk credentials.

Think of this as your starting point, certainly not your finish line.

Like reading the back cover of a book before diving in, you're just getting a feel for what someone claims they've studied, what exams they've passed, and maybe a hint of why they got into finance in the first place.

They might have a CFP and be a certified financial planner.

This one's the real deal.

Earning it requires thousands of hours of experience, a comprehensive exam, and a commitment to ongoing education.

CFPs are trained to think broadly about topics like retirement, insurance, taxes, estate planning.

They tend to be the planners in the room, not necessarily the stock pickers.

Now, this is purely anecdotal, but back in my portfolio management days, the unfair inside joke was that CFP stood for can't effing produce, meaning they didn't bring in assets to the firm, they just worked with clients.

But read that again.

That's a good thing for you.

It meant they weren't spending all day chasing new money for the firm.

They were spending time with you, the client of the firm.

So if someone's a CFP, I see that as a solid signal.

Someone who's choosing planning over production.

They might have passed the CFA exams and be a chartered financial analyst.

If the CFP is looked at as a generalist, the CFA could be looked at as a specialist with a capital S.

The curriculum is notoriously grueling, three levels, multiple years, and a curriculum that reads like a financial boot camp.

These are the valuation nerds, and just for the record, I'm a nerd, I'm allowed to say that.

These are the asset allocators.

These are the people who understand what drives prices in markets.

My only challenge here is that, in my opinion, they're often still trying to win the stock-picking Olympics, which, as you know, or hopefully know, is a race where the track keeps moving.

But that doesn't mean they're not brilliant.

If you want someone who deeply understands how markets work and can explain it without condescension, a CFA might be the partner you're looking for.

CPA, certified public accountant.

This is your tax guru.

CPAs specialize in accounting and some of them specialize in tax law.

Not all are financial planners, but if taxes are your biggest concern, especially in retirement or business ownership, this is a highly respected credential to look for.

And if your financial life is complex, a CPA can be a critical piece of the puzzle.

For me personally in my life, because I've got the investment part covered on my own, the CPA is is without a doubt my number one priority in life.

They might hold a Series 7, 65, or 66 license.

Bluntly, these are more like driver's permits than diplomas.

These are legal requirements that say, yes, this person is allowed to give advice or sell products.

But don't mistake permission for proficiency.

I had the Series 65, studied for about 10 hours, passed the exam.

Felt like the test had more to do with memorizing legal boundaries than with actually helping someone plan their life.

You've seen the Wolf of Wall Street.

Yeah, those guys also had their Series 7s.

Enough said.

Now, to be fair, let's zoom out.

Do these credentials matter?

Of course.

And only to a point.

Credentials show someone can learn, but not always that they care to.

Being good at tests doesn't always translate to being good with people, or with judgment, or with your money.

As Will Hunting once said, you dropped $150,000 on an education you could have got for $1.50 in lay charges at the public library.

Some of the best advisors I've ever met never sat for the CFA.

They didn't pursue a CFP, but they did sit with people.

They listened, they learned, they cared, and they got really good.

Not because of some fancy initials, but because they wanted to be.

Credentials can be clues, but they are not the whole story.

Always read past the cover.

Number two, speaking of fancy titles, are they a fiduciary?

I know this is the word of the era, fiduciary.

We whisper it like a protective spell.

Ask Ask if they're a fiduciary, and boom, you are safe.

As if that label magically transforms your advisor into Atticus Finch with a financial calculator.

But here's the truth.

Fiduciary is a legal designation, not a character assessment.

It means they are required, by law, to put your interests ahead of theirs.

It sounds noble.

It sounds clean.

But let's not confuse legal obligation with moral fiber.

Bernie Madoff Madoff was a fiduciary.

So was the guy who sold pensioners' junk bonds in the 80s while wearing a Rolex the size of a sundial.

As the philosopher Diogenes once said, the foundation of every state is the education of its youth.

I'll bet if he were to revise that today, in the light of this conversation, he would say, the foundation of every financial plan is the discernment of its client.

The danger lies in assuming that titles guarantee integrity.

They do not.

They merely set minimum standards, legal guardrails, not a personal compass.

Human beings are messy, self-interested, inconsistent ding-dongs.

What you're really hiring is a worldview wrapped in a person.

So yes, ask about fiduciary status, but then go deeper.

Ask better questions.

Look for clarity over charm, honesty over polish.

The goal is not just to trust, but to verify.

Because in the end, you're not looking for a label.

You're looking for character.

And that takes more than a title.

It takes time, curiosity, and the courage to not be dazzled by credentials alone.

Or, as Shakespeare wrote in The Merchant of Venice, the devil can cite scripture for his purpose.

An evil soul producing holy witness is like a villain with a smiling cheek.

A fiduciary is a starting point, not a finish line, so don't stop at the word assess the person.

Number three, how do they get paid?

Option one.

AUM model or assets under management.

You've probably heard me or seen me reflect poorly on this model frequently.

The industry standard is that many advisors or investment managers charge 1% of your assets annually.

That's $10,000 on a million dollars.

But for the same reason casinos take your cash and turn it into little play chips so you don't really know how much you're losing at the table, those using the AUM model rarely, if ever, talk in any terms other than percentage because 1% just sounds so innocent and cheap.

That is until you realize that now that your portfolio is worth $3 million,

you're paying your advisor $30,000 a year to invest.

That's a lot of money.

Also, quick human nature alert, and yes, I am being cynical on this one.

If you have two clients, one of whom is paying you $40,000 a year and one of whom is paying you $1,000 a year, who do you think gets the priority?

And yes, even the saint-like fiduciaries have inboxes and instincts as to who they will call first.

Option two is a flat fee subscription model.

This is becoming more popular with some of the bigger firms.

You pay a set amount, $2,500 a year, $5,000 a year, regardless of your portfolio size.

This separates advice from asset size.

Now, it's not better for everyone, but it is more transparent.

And honestly, I prefer this model.

Why?

Because managing $2 million

is not twice as hard as managing $1 million.

Computers do the asset allocation these days.

It takes five seconds.

Managing a million is the same as managing 10 million.

The concept alone cannot be justified.

Good asset allocation, textbook asset allocation and investing, is based on percentage of your principal that we allocate to different asset classes or investments.

It is not based on the size of your principal.

Bottom line, there isn't a right or wrong answer here, even though obviously I'm slightly biased, but like anything else in life, do a quick cost-benefit analysis, see what you're paying for, and see if it's worth it to you.

Number four, ask the advisor what they'll do with your money.

This is a really important question, and very few people ask it.

We want to know how advisors actually invest the money because what someone recommends reveals a lot about what they believe, how they're compensated, and frankly, whether they're living in 1995 or 2025.

If they tell you they're investing you in low-cost index funds, personally, I already respect them.

I love an advisor who champions cost efficiency because it suggests they've read the data, they respect compounding, and they aren't trying to outsmart the market or you.

But then I have to ask, if we're just buying index funds, what exactly am I paying you for?

If I can do this myself in 10 minutes with a cup of coffee and an internet connection, I'm not quite sure what the added value is.

Again, unless you want a coach or a second set of eyes or go back to the skill will time litmus test.

So unless they're also providing planning, strategy, context, that simplicity shouldn't come with a complex bill.

Are they going to actively pick stocks for you?

Statistically,

no.

After fees, active managers consistently underperform broad indexes over the long run.

It's not just a theory.

It's practically Newtonian at this point.

Honestly, I'm amazed this model still exists.

Yes, it can be fun to pick stocks.

No, it is not smart to necessarily pick stocks.

It's the financial equivalent of trying to beat a GPS by using a paper map and your gut.

The evidence is overwhelming.

Long-term outperformance through stockpicking is as elusive as it is seductive.

I get it.

But I wouldn't bet your future on it.

Or are they putting your money in actively managed mutual funds?

Here's where it gets even messier.

If your advisor is putting you into actively managed funds, what they're doing is charging you to pay someone else another layer of fees.

It's a bit like hiring a chauffeur who then hires another chauffeur.

Now you're paying two people to drive the same car.

The fund may charge 1% or more.

Your advisor may charge another 1% or more.

And guess who eats the cost?

Hint, not them.

Finally, are they selling you commission-based products like annuities or life insurance?

Now we're entering murky waters.

Let's be fair.

Not all insurance is bad, and not all annuities are traps.

But if someone's being paid upfront based on what they sell to you, they are no longer a neutral party.

It is a baked-in conflict of interest.

And what boggles my mind is that some of these folks can still call themselves fiduciaries.

So, what would I want?

I'd want someone who uses low-cost funds, practices holistic planning to give me some added value, and isn't trying to sell me magic beans.

I want someone who sees their role not as a gatekeeper to investment products, but as a true guide, my money guide on the side, if you will, helping me navigate life's decisions with clarity and care.

And yes, I'd be happy to pay a fair price for that, because that, to me, is real value.

Number five, blame the former teacher and lifelong student in me, but I would want to know if they will teach me.

Because the best advisors to me are like the best teachers.

They're not aiming to impress.

They're aiming to connect.

They adapt, they listen, they explain, they don't speak in riddles or dazzle with jargon, they translate, they meet you where you are, and they walk with you from there.

If you leave every meeting with your advisor more confused, more anxious, or more judged, you're with the wrong person.

A great advisor doesn't want to be the wizard behind the curtain.

They want to pull the curtain back.

They want to empower you to understand your money, not depend on them to hoard the knowledge like it's gold in Smog's cave.

It reminds me of what T.S.

Eliot once said, only those who will risk going too far can possibly find out how far one can go.

A good advisor nudges you toward those risks that matter, the hard conversations, the overdue decisions, the long-term thinking, while holding your hand just enough so you don't fall off the dang cliff.

They make you smarter.

They make you more confident, less reactive.

They explain Roth conversions like they're teaching you how to ride a bike, not like they're performing surgery.

And the good ones know this:

money isn't just math, it's identity, memory, meaning.

Look for the one who gets that.

Number six, what value do they add beyond financial returns?

If an advisor ever opens with, I'll beat the stock market.

Trust me, I'll beat the stock market.

I would excuse myself politely and I would run.

That line is a relic from the 1980s, like a Wall Street VHS tape stuck on repeat.

It's not just outdated, it is a massive red flag.

Anyone still clinging to that pitch or pretending pretending that that's the added value either hasn't read a financial journal since Reagan was in office or they think you haven't.

Decades of academic research have made it abundantly clear most advisors and portfolio managers do not beat the market over time, especially after fees.

But here's the twist.

That's not even their real job.

The best advisors aren't trying to be magicians.

They're trying to be mirrors.

They reflect your values.

They help you face your fears.

And they keep your future self from sabotaging your present one.

That's the real alpha.

Not beating the SP 500, but helping you beat your own worst impulses.

Pay for a coach.

Pay for a steady hand.

Pay for someone who says, let's talk before you sell.

Not, trust me, I've got the next big winner.

I once built a thoughtful thoughtful long-term growth portfolio for a friend, someone who worked in finance.

The second the market dipped, he sold it all.

No call, no discussion, just panic.

Locked in a 10% loss.

And the thing is, he knew better.

But fear doesn't care what you know.

Fear only cares what you do in that moment.

So imagine this.

You're paying someone 1% per year, and they stop you just once from making a fear-based 10% mistake.

That's a decade of fees covered in a single decision.

So even though I don't love the 1% model, if it saves you from losing 10%, I'm in and I will put my stamp of approval on that because a good advisor helps build that temperament.

And in the long run, that will beat any market.

Finally, number seven, and this one is one that I know many of you aren't going to want to ask, but it is easily my favorite question to ask.

And I'll keep it very short and very sweet.

Ask them how they invest their own money.

They're under no obligation to answer, and that's why it's a great question.

Because if they're putting you in something they wouldn't touch themselves, or they get squirrely about the answer, or they get defensive about the answer, that's all I need to know.

Because advisors will always ask you to be incredibly vulnerable with your finances.

So I want one who's willing to do the same.

Walk the walk with me.

In closing, should you work with a financial advisor?

Maybe.

But don't just grab the first person with a fancy card and a solid title.

To make this as relatable as possible, choosing an advisor is just like dating.

I'm not kidding, it is just like dating.

The best advice, and yes, this is advice, I am giving absolute mass advice on this one.

If you are looking to work with a financial planner, go on a date with them.

Grab a coffee, ask the hard questions, see how they listen, see if they speak your language, see if they share or reflect your own values, and remember Hemingway's advice to writers.

He says, the most essential gift for a good writer is a built-in shock proof BS detector.

You want to make sure to bring that detector with you when you go on a date or when you go on an interview with a potential financial advisor.

If they seem like the wrong fit, go interview somebody else.

Or if you're currently working with an advisor and it's a toxic relationship, go work with someone else.

There are so many financial professionals out there, I promise, even though I know it's frustrating to continue to swipe left, you will eventually find the advisor for whom you'd want to swipe right.

And in full transparency, I haven't been on a dating website in a long, long time, so if it's no longer swiping left and right, please forgive the bad analogy.

Remember always, everyone is selling something.

The question is, do they believe in what they're selling?

Are they charging a fair price?

And are they honest enough to tell you if you don't need it?

That's the bar, and you deserve nothing less.

Thanks for tuning in to your money guide on the side.

If you enjoyed today's episode, be sure to visit my website at tylergardner.com for even more helpful resources and insights.

And if you are interested in receiving some quick and actionable guidance each week, don't forget to sign up for my weekly newsletter where each Sunday I share three actionable financial ideas to help you take control of your money and investments.

You can find the sign-up link on my website, tylergardner.com, or on any of my socials at Social CapOfficial.

Until next time, I'm Tyler Gardner, your money guide on the side, and I truly hope this episode got you one step closer to where you need to be.