Do-it-yourself or get a financial advisor? This is an age-old question that consumers are always asking themselves. There are many differing viewpoints on this debate, especially when it comes to comparing the efficiency and effectiveness of DIY or financial advisors. To help you make a better decision as a consumer, we dive into this debate with the most compelling reasons for each school of thought.
4 reasons why you should choose DIY
1. You know where your best interest lies
Let’s be honest. Nobody knows your own financial goals better than yourself. Regardless of how good your financial advisor claims to be, he cannot read your mind. As such, it takes a lot of explanation and communication for him/her to find out what you want to pursue as a financial goal.
And even if he/she understands the rough timeline of your goal, they do not feel the same urgency as you. The sad truth is that even if you do not achieve your goal, your financial advisor will still earn his share of commission. Thus, we are more confident that you will be more motivated than your financial advisors to do a good job in your financial planning.
2. It’s difficult to find the right financial advisor
The other thing is that we are rather sceptical whether financial advisors really have your interest in mind. While financial advisors have the fiduciary duty to act in your interest, it is difficult to find an honest and ethical financial advisor. After all, their main motivation is to get you to sign on the line and commit to an insurance or investment plan.
Some financial advisors will even sell you all the nice things about the plan just to get you hyped and commit to buy. Moreover, if you bought the “wrong” product, it means that there is still a missing element in your financial plan. This allows them to cross-sell new products to you and earn more commission out of your pocket.
3. Don’t limit your choices
If you rely on financial advisors to create a financial plan for you, chances are that the products will come from the same company. This is because most financial advisors are tied agents that can only sell financial products of a single financial institute. For example, Great Eastern financial advisors are only able to sell financial products from Great Eastern.
The fact is that each company has its own line of product that stands out from its competitors. It is unlikely that a single company has all the greatest products under its roof. As such, if you rely on financial advisors, you are limiting your choices.
While there are independent financial advisors who are able to advise on multiple companies’ products, they are often given shorter ends of the stick. These independent financial advisors are usually excluded from advising on the best financial products of financial institutions. Companies like Aviva and AIA will keep the best products for their own tied agents. After all, who will want to be a tied agent if independent financial advisors have the privilege of selling everything?
4. Save your commission
It is a universal fact that all financial advisors receive commission from recommending a product to you. Instead of paying a commission to financial advisors, why not do your own research and make your own recommendation? If you DIY, you can save a significant amount (think few thousand dollars). You can either buy insurance with higher sum assured or simply invest the amount that you save from not getting a financial advisor.
3 reasons for getting a financial advisor
1. They can help you save time and get started early
Having to compare across multiple financial products takes time and effort. In today’s fast-paced society, you might not have the time to take care of your financial plan. Because of the lack of time, you find yourself postponing financial planning for your future.
By the time you realize, it would have been too late. If you are one of those who do not have time to take care of your financial plan, then getting a financial advisor is the way to go. Getting started early can make a huge difference, especially in investment plans.
2. You are not a money person
Some people just don’t have the discipline or the right knowledge to manage their money. Others are just not a money person. Yeah, we get it. If you fall into this category, then getting a financial advisor is recommended (if not mandatory). Even if the financial advisor isn’t fantastic, he/she will still help you put a decent financial plan in place at the bare minimum.
If you are lucky, you might find yourself in the hands of a good financial advisor who can help you to achieve your financial goals.
3. Insurance and investments are too technical
The world of finance is always using complex terminology to describe financial products. It is as if the more complex sounding they are, the easier they can be sold. Because of the technicality of financial products, it is sometimes difficult for average consumers to understand, let alone compare them.
Since financial advisors look at the products every day, they will generally have better knowledge than consumers like you and I. The good financial advisors can even break down complex terminology into simple concepts for us.
DIY vs FAs: Which is better?
Unfortunately, there isn’t a clear-cut winner to this age-old debate. Your choice is dependent on how much time and effort you can commit to building your own financial plan. If you are able and willing to commit time and effort, why not DIY? If you are unwilling or unable, then getting a financial advisor would be your best bet.
That being said, we find DIY a better choice given the flexibility in choice, savings from commission-free products and the right motivation factor.