When Does It Actually Make Sense To Hire A Financial Advisor?

Some of you I know you , and it doesn't make sense to work with an advisor . It just depends what stage of life you're in and ultimately , once again , what is the experience you're looking for . The two most common phrases that I will hear and other advisors tell me it's I don't know what , I don't know or I know enough to be dangerous .

So today's episode is not me going through . Here are 10 reasons you should or shouldn't hire an advisor . I go through three primary considerations , but more than me going through that , I'm giving you a client story of someone who actually had multiple financial advisors and how they thought through their process . I think it's going to be insightful for you .

Now , the audio on this episode , once again , is not the best , unfortunately , because I did record this while driving the state of mind I was in . I wanted to have it come across that way . So hopefully that you guys find this episode helpful and we're going to hop right in .

A few weeks ago I recorded a podcast and the audio wasn't the best , but I had a point that I wanted to get across . It was a client story . Now a lot of you listened to that episode and said , ari , I want more of that . That was awesome . I don't care , the audio wasn't great . So I said , okay , this is resonating .

I want the audio to be the best because when I listen to podcasts and the audio isn't crisp , I'm saying , hey , I wish this was , because it's just nicer to listen to .

The reason I'm telling you this is because I've got one more client that I want to bring to your guys mind , and the client that came to me was working with Vanguard , and if you're familiar with Vanguard I imagine most of you are , but if you're not , vanguard super low cost index fund approach . They had come to me and they've already had three advisors .

So they came to me and they had three advisors in the past . They were burned by one advisor who was selling them these products with high commissions . They said , hey , ari , we were young , dumb , didn't know what we were doing is what it is .

Then they had another advisor who was a friend of theirs and their friend actually did a good job , but then they retired . So then they're going . Okay , now what do we do ? They were passed off to another advisor and they said you know what ? We've got to figure this out ourselves .

So from there they went to Vanguard , which is the super low cost once again index fund solution , and Vanguard is great . Let me be clear I like Vanguard , and Vanguard was giving them some very basic guidance on how they should invest their funds , and I believe the basis points that they were being assessed is 35 basis points .

So 0.35% was their annual fee , which is very low , and they were getting some basic guidance . Now they came to me going Ari , I don't know if it makes sense for us to pay you , because we're getting good guidance right now . It's not the best and maybe we're leaving something on the table , but it's pretty good right now .

I said , great , like I don't think it makes sense to pay me anything until we even see if I can add value . And there's , of course , the quantifiable way of looking at should you hire a planner . And then the not so quantifiable piece , and the reason I'm bringing this up today is this is a current client of mine .

So I , of course , could cherry pick and show you a client where they didn't end up working with us and I will in the future .

I'm all about transparency and showing you guys these stories , but the reason I'm titled in this episode is when should you consider hiring a planner , instead of why you need a financial planner , because I don't think all of you do .

Now , other advisors don't like when I say this because they go no , ari , don't say that You'll need to work with an advisor and I tell them who cares . It depends on what stage of life you're in . If you're 20 years old and you just want to make sure that you're saving and doing all the right things , I tell you probably don't pay an advisor .

Like set yourself up well , educate yourself and you'll be in a pretty good spot . Now some people truly just do not want to ever think about investments or look at it and there could be some value of having an advisor . But I'd probably say don't work with us . We work with people that want to retire early .

Those are the only people that I work with and the benefit from that is that's where I can add significant value because of all the tax planning work that I do Because of the estate planning , because of how income gets generated and you know where to pull from what .

So I'm telling you this because I want to go through three quick reasons on when you should consider hiring a planner . Number one is if you're not sleeping well at night .

The first reason , before we go through any financial examples , is if you're not sleeping well at night and the client that came to me , they're like already I'm at Vanguard but I'm not sleeping because I know I could be doing better . I know I haven't had a great advisor in the past .

I don't know if you're going to be a great advisor if I work with you , but I know I'm leaving something on the table and some of the stuff that you talk about resonates . So I said , okay , let's even have a chat to see if it makes sense . That's step one .

And what they were telling me is that when they asked their Vanguard advisor what the right allocation is , it's a little cookie cutter , it's like here's your age , here's the model , and they told me that their model would not allow them to have 80% in equities , even though they ran some planning projections themselves and they knew that that was the right allocation

for them . And Vanguard just wouldn't let them do that , because if they didn't fail at a certain form or paperwork , vanguard's going wait a second . This doesn't make sense . Look at your age Like , your age just shouldn't allow for this amount in equities . What Vanguard didn't understand is they had a pension that was going to cover all of their needs .

So , once again , going back to being cookie cutter , I'm not going to ask someone their age and risk tolerance . And so this step one once you consider hiring a planner , are you sleeping at night ? Some of you are like , yeah , I'm sleeping great . I'm like , great , maybe don't hire an advisor . But some of you are going you know what ?

Yeah , I'm sleeping well , but I just don't know what I'm missing and I don't want to look back in five years and go why didn't I look at planning earlier when I could have added millions of more dollars to my plan through just thinking through this a little differently ? That's number one .

Number two is is your advisor competent , meaning , are they a certified financial planner , which all of us are here at Root Financial Partners ? But that's , once again , step one . Okay , a lot of dopey jokes you're gonna hear from me . You've probably heard a lot of these already .

But a neighbor of mine a few months back said Ari , I think I should consider hiring you because you're a fiduciary . I said no , no , no . That's when you're gonna consider having a conversation with someone . That's the basis of when we're gonna even consider talking .

When you hire someone is when you see that there is quantifiable value and the not so quantifiable value Because at the end of the day I asked all my clients . I said why did you actually hire us ? And they said , Ari , to be honest , I hired you and your team because tax planning was not happening in my plan . I said okay , and this is the current client .

I said is that the only reason they go ? Yeah , pretty much Like I have a good advisor today . I know I can be doing better . I see the value of doing tax planning with you and your group , so that's why I'm hiring you . I'm like , okay , a few years go by , I said why are you working with us ?

And they said well , I'm working with you because I don't want to have to deal with it . I now see what I was leaving on the table by not investing a certain way . I now see the value of estate planning . I now see why insurance is important , yada , yada . So the point of this is is your advisor competent ? Meaning , are they a certified financial planner ?

Do they have other designations ? You know I have my MBA as well , but the reason for that is I want to be able to run a business a certain way . I want to run my practice a certain way . If an advisor doesn't have their MBA in addition to a CFP , it doesn't mean they're bad , and if an advisor has a thousand designations , it doesn't mean they're good .

So I've seen people and interviewed and trained advisors who have all the designations in the world and I wouldn't give them a dime of my money . So number three here , which in my opinion is the biggest , not just can I add value , not just is my advisor competent , but do you enjoy meeting with them ?

To me , if you're working with an advisor , I don't want you going ugh . It's boring . Already again that's going to talk to us about numbers and graphs . I don't subscribe to that . I believe in saying I can't wait for this meeting with my advisor . Unfortunately , that's not the case .

I want hiring an advisor to be up there , just like you married your dream spouse , you picked your dream college , you have your best friend and you have your advisor . Unfortunately , that is just not the case . More often than not , people coming to me they've had two , three , four , five advisors and now and sorry for the audio , I know once again .

But people are coming to me and they are saying , once again , I need help . I just don't want to get screwed over . At the end of the day , if we're just being transparent , people are going . I don't want to pay a fee and not get value for it clearly , and I tell people please don't pay the fee , but on top of that they're going .

Hey , I want to make sure that if someone you know I hire resonates with me that they're going to speak a language that's going to resonate with my spouse , because one day I'm not going to be here and I want my spouse taken care of .

And if this advisor uses all these big fancy words that I understand because I'm a podcast listener and I understand Roth conversion language , but they do not want to hear about it , I want to make sure that this advisor understands how I want my spouse to be spoken to . So there's multiple levels of planning and here's how I like to break it down .

There's three types of advisors , there's a financial picker . This is traditionally , even in the 80s and 90s , someone who's just going to say you know what ? Client X , client Y , you need this stock , apple stock , is going to do XYZ for you if it grows like this over time . That's like level one .

They're not doing tax planning , they're not doing insurance guidance , they're not doing estate planning . That's level one . They are a financial picker . They are picking solutions for you . Then there's level two . Level two is a financial planner .

Now , a financial planner there's a lot of these today , in my opinion Someone who's going to say you know what , joe and Sally , what's your name , what's your risk tolerance , when do you want to retire ?

Let's plug some figures into this graph or this calculator I found online , and it's going to spit out a model and it's going to spit out a level , percentage of success , and that's level two . Then there's level three .

Level three is a financial protector and that's what I view ourselves as , which is not what's your age and risk tolerance , but to tell you what do you really want to do with your life and , based on that , is your plan accurately reflecting that ? And that's it .

Let me get to know you If I don't get to know you and you don't know what you want to do in retirement , then that's a problem . Let's talk about it and maybe with us or with our retirement lifestyle coach , who's on staff and it's asking hey , what's your estate plan ? You're like , no , I already have a trust in the will and we'll tell our clients .

That's not what I'm talking about . I'm saying what's your plan to not die with $10 million , so you don't become a burden to children where now they don't take a job that otherwise they would have loved because they're like I don't want to get taxed like crazy . If God forbid something happens to you , guys , I'm now taxed at the highest rate .

So estate planning is beyond . Do you have a trust and a will ? It's saying , hey , do you have the right level of spending ? Are you spending the amount that allows you to do everything you want to do ? And do you understand if you don't spend it ? Here's the ramifications .

Do you know that if you want to leave $2 million to each child , here's what has to happen . So estate planning multiple levels to this Same thing with insurance . A lot of you are coming to me . You have umbrella policies . You don't need them . Some of you are going . You know what ?

I have an umbrella policy , but I'm just sleeping better at night because I have it .

I say , great , I'm a financial protector , I know what's most important to you , which is your sleep , and making sure and I know the audio is a little better now because I'm on a better part of the road that , no matter what happens financially , you are going to sleep better by having insurance .

I have clients that go Ari , I'm happy to overpay , I'm happy to overpay for insurance because I'm sleeping better at night . I say , great , let's understand what is most important to you . When do you want to retire ? How much can you spend ? And if we really don't get to know you , we really can't give guidance .

So to summarize for you we're looking at this going . Are you excited to meet with your advisor ? Is your advisor competent and can we add significant value in excess of our feet ? If it's incremental , we'll say , hey , don't hire us .

So this client that did end up working with us , who came to us from Vanguard they were getting cookie cutter guidance and wasn't bad , but they knew there was something better and we showed them how we could help . There are other instances where people have similar thoughts and they don't end up working with us , but they feel better because they go .

You know what I went through your process ? It was a meeting , it was a couple of meetings and now I see what we're on track for and they go . Wow , I'm in a better spot than I thought . Like I really don't need you guys and I love tax legislation and I love staying up to date on the latest .

You know , financial , you name it and they're good and I say great , then don't hire us . Like I want people hiring us who are going . I cannot wait to pay the fee . Like I'm excited , I'm over the moon every month I see that fee comes out of our account and I see the value I'm getting for it .

And if not , it really doesn't make sense to pay us or anyone . So when are you going to hire an advisor ? It's when you're excited to meet with them . It's when you go . You know what I'm tired of leaving money on the table . The two most common phrases I hear personally are I don't know what , I don't know , okay .

So some of you are going yep , that's me and more of you are going to resonate with the following , which is I know enough to be dangerous . I feel like I kind of got my head around tax gain harvesting or when to implement a Roth conversion or how to lower my RMDs , but I know high level .

I don't know actually how to execute this and how this should shift , based on when I want to retire , or based on my pension , or based on when I collect Social Security , and it's the the coordination of all of those that people I find are missing and that a Vanguard type solution is not offering . Vanguard has great products .

A lot of my clients stay invested at Vanguard , so they're coming to me from Vanguard where they're getting super low cost . They've been burned by multiple advisors and we're sticking with Vanguard products , so those types of mutual funds and ETFs , but we're just adding on that layer of planning .

Now a lot of you will ask us the following do you do one time plans ? Do you do hourly billing ? Do what other options do you have ? And I've tried all the options . Okay and from a profit perspective , it did not hurt our company by doing one time plans or hourly planning .

I found it was not in the best interest of the client because people ended up not implementing things or implementing them incorrectly , and I found the only way to really work with an advisor effectively now this isn't for everyone , but to people that want to work with us is on an ongoing basis .

So we only work with people on that assets under management model . Now some people come to us . They've got $500,000 with a million dollars locked up in a 401k people . I'm saying , hey , let's manage the $500,000 and implement it well , let's give you guidance on the million dollars and when you retire , we can talk about what makes most sense then .

So it's not as if all of this has to be eligible for management by us . Now , by the way , pro tip for all of you if you are over 59 and a half and you are listening to this episode , ask your employer if an in-service distribution or in-service withdrawal is even an option .

What this means is you can move your money once you're over 59 and a half for a lot of your plans into an IRA or Roth IRA and invest in however you want , instead of just those limited options that are at your employer . It could be a really helpful tool .

So , with that being said , trying to put this all together for you when you're thinking about this okay , what makes sense , what doesn't make sense ? Hiring a planner is a big decision and I want it to be one of the best . Unfortunately , it's not the case .

So go look at Google reviews , go look at Yelp reviews of any advisory that you're considering working with to see if it makes sense . To see if people say , yeah , this guy or girl knows their stuff , but on top of that or they should , I say nowadays , they know their stuff , but do they actually find that clients like meeting with them ?

I know it sounds a little odd to say that , but I would ask that , okay , and then finally ask yourself , of course , meaning when you're doing research , is it ? Yeah , yeah , this makes sense . This is someone that I really think I'd enjoy meeting with . I've heard their podcast . I've interviewed this team for thousands of hours .

This is the group that specializes only in early retirement planning , because that's all we do . We don't work with everyone . If you are in your 70s coming to us , we'll only work with you . If you retired early before now you're retiring again because there's nuance to that . But most people they're between 50 to 65 .

They've got 1 to 3 million bucks in liquid assets . They're coming to us . They want to retire with confidence . So that's all I had for today's episode . Thank you . A little bit of a shorter one still at the early retirement show . If you have a question that you weren't answered in a future episode , you can always go to our website .

I can't edit this podcast today just because I'm driving and I had something stuck , so I know that audio is not going to sound great right there , so I apologize for that . But you're getting it as transparent as it really is against right now . Thank you for listening .

If you do want to work with us , in the description of today's episode you are going to see a link to apply to work with us and you can go ahead and fill that out and you are going to get a response based on what you fill out there .

So , with that being said , I hope that this episode was insightful and I love you guys , and we will see you for our traditional podcast episode every Monday . See you guys .