Hiring a Wealth Management Advisor May Be Worthwhile

by Scott Sery on September 30, 2013

Many times people will try to save money by doing their investments on their own.  They spend hours studying their portfolio, and analyzing which investment bonds, mutual funds, stocks, and other products they should include.  Managing your own portfolio is possible, but sometimes it is more worthwhile to hire a wealth management advisor to do the work for you.

There are two ways that you can hire a wealth management advisor (note: wealth management advisors are similar to financial advisors, however, they generally deal with larger accounts, or the accounts are more actively managed than their counterparts).  The first method is to find a fee based advisor.  These types will provide financial advice for a one-time fee.  They will help you to build your portfolio (and often do a holistic financial plan for you), but then it is up to you to do the ongoing work of rebalancing and managing.  The other option is to go with an advisor that charges based on assets under management.  Most will charge around a 1% annual fee that is billed quarterly (simply deducted from the account, no need to write a check each quarter).

There are benefits and downsides to both methods of advisors.  If all you need is someone to help you develop the portfolio, but then you wish to let it ride; a fee based advisor will work well for you.  However, if any of the funds that have been chosen start to slump, it will be up to you to find a suitable replacement, or pay the fee again for another visit to the advisor.  The asset based advisor will work well for those who want constant attention to their portfolio.  They can have the best performing funds, an advisor that will monitor their account regularly, and the comfort of knowing that someone is looking after their portfolio.  However, many advisors charge a lot to manage portfolios.  Even the 1% fee is a turnoff for many people (plus you will still have to pay the mutual fund fees of around 1% as well).

Often a wealth management advisor will manage a portfolio in such a way that the portfolio will do better than if it was not managed.  Therefore, the selling point is that you could get an x% return on your money, but if you hire someone to perform financial management, then you will get an x+1% return (or more).

There are times when it makes sense to hire a wealth management advisor to watch your portfolio.  And there are times when it makes sense to do the work yourself.  It is up to you to determine how much time you are putting into your accounts, and how much that time is worth to you.  If you have an advisor that you trust, and their fees are reasonable, you may be better off using their expertise.

The following two tabs change content below.

Scott Sery

Scott Sery is a native to Billings, Montana. Within an hour in nearly any direction he can be found fishing, hunting, backpacking, caving, and rock or ice climbing. With an extensive knowledge of the finance and insurance world, Scott loves to write personal finance articles. When not talking money, he enjoys passing on his knowledge of the back country, or how to live sustainably. You can learn more about Scott on his website Sery Content Development
  • I guess most people don’t have those large investment portfolios to the services of a wealth advisor. Most do well just on their own or engaging the services of a fee only advisor to take a cursory look at their portfolios. As with all things though, its always nice to consult a professional in the field, they might end up offering insights into steps you could be taking to improve your portfolio perfomance.

  • I don’t have nearly enough money to have a wealth management advisor, but I don’t think I would hire one even if I did. I’d probably stick to a fee-based advisor and learn about how to invest my money myself. That being said, there is definitely a time and place for them.

  • Done by Forty

    This probably shows my paranoia, but I don’t trust professionals in the investment arena to manage my money or to advise me. It seems their interests are against my own, even in a fee based model. That is to say, it’s in their interest to withhold at least some information so that I come back for another session.

    In any case, we’re DIY for now but perhaps when our portfolio is large enough, the fees will be relatively small enough to stomach them.

  • I’m not pretty sure about a financial advisor. I mean when will a portfolio be large enough to be really in need of a financial advisor. At what point should one decided that this IS a need?

Previous post:

Next post: