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Advisor vs doing it yourself

Doing it yourself keeps the advice fee. Hire when one hard-to-undo decision costs more than the annual bill. Price that decision in dollars, then choose.

The short answer

Doing it yourself keeps the advice fee. You choose the funds, you rebalance, and you are the person who has to sit still when the market is ugly. Hire when one decision is hard to undo and the mistake would cost more than the annual fee: a rollover, a retirement paycheck, a pension choice, or a tax choice you cannot replay. A hybrid is allowed. Pay for the project, then go back to doing it yourself.

Is a financial advisor worth it? is the broader test. This page is the stay or hire list for someone who already manages the account.

Stay with your own process whenHire for this job when
The account is a fund you understand and you add to it on a scheduleYou are about to roll a 401(k) and you have not written the costs of staying
You rebalance without someone emailing youYou are choosing a pension or a retirement paycheck this year
A bad year does not push you to sell the planYou know you sold in the last bad year and you want a written rule first
The annual advice quote is large next to the work leftOne decision, priced as a project, is smaller than a year of percent-of-assets fees

What to do

  1. Write the job in one line. "Pick funds for a taxable account I will not touch" is different from "tell me whether to roll this plan." If the line is the first one, price a robo-advisor or a do-it-yourself fund before you price a person.
  2. Get the annual advice fee in dollars on your balance. A 1% quote on $500,000 is $5,000 this year. That figure is arithmetic, not a typical fee. The fee calculator uses the rate in the brochure. The menu of fee types is the cost page.
  3. Write the cost of the mistake you are afraid of, as a range you can explain. If you cannot name the mistake, you are not ready to compare it to $5,000. "I might feel anxious" is a feeling. "I might roll the plan and give up a match or a cheap fund" is a decision.
  4. Ask one firm for a project price on that decision only. Ask another, or the same firm, for the annual percent if they stay. Hourly vs AUM keeps those bills from blurring.
  5. If you stay on your own, write the rule you will follow in a bad year: what you hold, when you rebalance, and who you will not call. A rule on paper is the part of advice you can keep without the fee.
  6. If you hire, keep the custodian statement in your name and read it. Hiring is not the same as handing someone a check payable to them. Does my advisor have my money? is that check.

What to look for on Best Investors

  • Item 5G. You are looking for the service that matches the one line you wrote. Planning is 5G(1). Portfolio management is 5G(2). Do not pay for a service menu you will not use.
  • Item 5E. The box has to match the bill you asked for. A project is often hourly or a fixed fee. An ongoing watch is often a percent. Item 5E(3) is newsletters, not a monthly coaching retainer.
  • The brochure scope. If you are hiring for one decision, the engagement letter should say the engagement ends. An open-ended percent is a different product.
  • Search, then stop. You do not need a firm page if the written comparison says the decision is small and you will follow your own rule.

Common mistakes

  • Hiring an ongoing percent because a friend did, when the only task was a fund you already own. See the target-date page if that is the holding.
  • Staying do-it-yourself on a rollover because you are proud of the rest of the account. The rollover can be the expensive mistake. The 401(k) page is the comparison to write.
  • Assuming a hybrid is messy. A paid plan, then you implement it, is a normal scope. Say so in the letter.
  • Comparing your fund expense ratio with an advice fee and declaring a winner. You may pay the fund either way. The advice fee is the extra line. Name it.
  • Forgetting that you are the behavior risk. If you have already abandoned a plan once, a written rule or a short engagement is part of the cost, not an insult.

Related questions

Is a robo-advisor the middle path?

It can be, when the job is a portfolio and a rebalance. It is a weak fit when the job is a pension form or a death. Read the scope on the robo page. Named digital advisers there are examples, not a ranking.

What if I want a one-time review of what I already do?

Buy hours or a fixed fee, with a written list of what they will review. You want comments on your funds, your savings rate, and the next decision. You do not need to transfer the account for that.

How do I know the mistake is bigger than the fee?

You will not know with precision. You can still write the dollars. A rollover that adds 1% a year on $500,000 is $5,000 every year you leave it there, on top of fund costs. That is arithmetic of a 1% quote. If the decision is smaller than an afternoon with the plan document, do it yourself.

Can I fire them after the project?

Yes. The letter should say the project ends. What happens if I fire my advisor is the sequence if an ongoing agreement is what you signed by mistake.

Limits

This page does not know your taxes, your plan document, or your nerves. It is not investment or tax advice, and Best Investors is not the SEC.

The $5,000 example is 1% of $500,000. It is not a typical advice fee and not a forecast. The firm filled out Form ADV. We do not grade do-it-yourself portfolios.

If our copy and IAPD disagree, use IAPD.

Sources

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