Is Paying For Financial Advice a Luxury?

I have gleefully retold the story of why I fired my previous financial advisor. On the other hand, I have also memorialized the loss of a friend who was my first financial advisor. In neither account do I deny the strength of the fiduciary responsibility, yet if you read both posts back to back you may feel my views are rather schizophrenic. And the truth is, although we in the financial independence community are big fans of DIY, there are times when it makes sense to pay to have something done right. The question thus remains. Is paying for financial advice a luxury or a necessity?

First, I should make clear that I’m not talking about accountants and lawyers here. The details of tax efficiency and legal estate planning are above most of our abilities or time allotment. I’m mainly referring to financial advisors that tell you how to invest cash and may give you some pointers about insurance.

Second, I think there are many definitions for luxury. In my case I am referring to:

Luxury: A condition or situation of great comfort, ease, and wealth. Something that is expensive and not necessary. Something that is helpful or welcome and that is not usually or always available.

Is Luxury Wrong?

Before even commenting on whether paying for financial advice is a luxury, it is important to contemplate whether luxury is in itself a bad thing. As I have lamented before, money is an intermediary. If you have enough of this intermediary, why not use some of it on something of great comfort, ease, or even not necessary.

We begin life with nothing, and if we are lucky, we expend most of our resources before we die. Why not pay for things that make us happy or remove a burden? Why not allow others to do some of the heavy lifting for us if we can afford it, and still be financially responsible human beings?

Investing Is Not Rocket Science

I have no doubt that paying for financial advice is a luxury.

Why?

Because it is unnecessary.

Investing is not rocket science. It is not only understandable, but within the grasp of almost all people intelligent enough to strive towards financial independence.

I can safely say that I learned the majority of what I needed to know about investing by reading a few books, and spending a couple of hours a month reading blogs. Am I an expert? No. Am I a novice? Yes. Do I know enough to match the returns and financial prowess of eighty percent of advisors? You better believe it. Sometimes perfect is the enemy of good enough.

Adequate financial knowledge is within everyone’s grasp for free.

Whether you want to grab it or not is up to you.

Who Needs an Advisor?

Simple. If you are emotional about money and will not be able to make good decisions in overly bear or overly bull markets, you need an advisor. If you are a high W2 wage earner who has no time for anything other than your job and are loosing thousands of dollars every moment you are not working, than you need an advisor. If you are wealthy and no longer want to bother thinking about the details, than you need an advisor.

Do you see a common theme here?

In each scenario, paying for financial advice is a luxury, not a necessity.

Final Thoughts

Financial advice may be appropriate for a certain segment of our population. That segment may even be large. But I think we have to call it what it is. Paying for financial advice is a luxury. And there is nothing wrong with luxury as long as we are clear-eyed and honest about what we are spending on.

I fired my financial advisor.

You may not want to.