Jill On Money: Should you fire your financial advisor?

This may be one of those indicators that signals the top of the stock market, but I have recently been inundated with a slew of questions that boil down to this: Should I fire my financial advisor?

Maybe investors think that it’s easy to rack up double-digit returns, because that’s what’s happened over the past 18 months or so.

In 2022, which was an awful year for investors, very few asked about giving the axe to their financial pro. Still, there is a case to be made that if you are paying someone to simply allocate your assets, there are a lot of cheaper alternatives.

If you are seeking a way to capture investment advisory fees, the easiest path is to do it yourself. Start by opening up an account at one of the big companies that offer low-cost index mutual or exchange-traded funds.

Once you have transferred the money into the new account, you will need to define your time horizon, an important component of establishing your asset allocation. The next part is to honestly appraise how you feel about risk. Think back to 2022 and ask yourself if you were worried or lost sleep over the drop in values. Conversely, if you reduced your risk and now feel bad about missing the subsequent upside, pay attention to that too.

Ben Carlson, the Director of Institutional Asset Management at Ritholtz Wealth Management recently wrote, “Investing itself is a form of regret minimization. Some investors regret missing out on the big gains while others experience more regret when they participate in big losses.”

You need to be clear about which regret causes you more anxiety and then, take that answer into consideration as you prepare to put your money to work.

Many companies offer risk assessment tests, asset allocation tools, and lots of supporting content to help you out. You may also want to educate yourself and indulge in some free advice from various social channels.

Just be careful to understand the motives of anyone preferring advice, regardless of the platform. As I noted in my book The Great Money Reset, when you seek advice on YouTube, Reddit, TikTok, or via podcasts, “you’re entering the mosh pit of investing — there are some super-smart people on there, some who have no idea what they’re doing, and others who have an agenda and are trying to hype one investment idea or another. Sift through what you encounter with a keen and skeptical eye.”

There is also a middle ground between paying someone to manage your money and going it alone.

Automatic investment platforms (aka “robo advisors”) can take the investment selection process off of your shoulders. Each robo product is slightly different, but they all usually begin with prompting you to answer a bunch of questions. The results churn through an algorithm and poof, your money is put to work.

The cost of most robos is usually under 0.25 percent annually, a lot cheaper than the 1-1.5% that full-service brokers charge. If you have over a certain amount of money invested with the robo, you may also have the opportunity to pay an additional small fee for financial advice.

So, who should pay up for customized financial planning? Anyone who has a more complex financial life, perhaps due to owning a small business, or those with a lot of income and no time, energy or interest in going it alone.

Additionally, anyone going through a major financial event, whether good or bad, or who is considering a major move, like a career change, can also benefit from the advice of a Certified Financial Planner.

Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.