DIY vs. Using a Financial Advisor: How to Decide What’s Right for You

I’ve been a DIY investor for nearly three decades, and a financial advisor for almost three years. I’ve always enjoyed learning about investing and managing my own finances and, honestly, never seriously considered hiring a financial advisor before I became one myself.

So why the career pivot? After many years in emergency medicine, I wasn’t mentally ready to retire — but I was ready for something different. I decided to dig deeper into my passions and see where that led. For me, that led to obtaining a master’s degree in finance, earning the Certified Financial Planner® designation, and starting an encore career helping others achieve their financial goals.

Because I had never been on the client side of the financial industry, I came in with a fresh, and admittedly naïve, perspective. I didn’t realize how broad the term “financial advisor” really was or how difficult it could be for consumers to tell the good from the bad. Now that I’m on the inside, I have a clearer view — and that is the point of this article.

This topic—DIY vs Using a Financial Advisor—is hotly debated in the physician finance blogosphere, with very strong opinions on both sides. I’ve read and contributed to plenty of those discussions, and I can see both viewpoints.

Of course, as a financial advisor now, I’m biased toward using one — but only if it is the right kind. A quality, fiduciary advisor can save clients money, protect them from costly mistakes, and provide real peace of mind.

If you’re asking yourself whether it’s time to get help with your finances, here are a few things to consider.

First, general principles:

1.       Everyone is different.  We all have different goals, different attitudes toward money, different aptitudes and interest in managing it, different family situations, different jobs with different salaries, and different histories of engaging the financial industry.  What may be the absolutely correct decision for one person, might be a disaster for someone else.  Sharing your experience with others is great. Assuming that your path is the right one for everyone is not.

2.       Personal finance is simple, but not easy.  The foundation principles of personal finance are straightforward: earn more than you spend, save and invest, use the power of compounding interest, watch out for hidden or exorbitant fees, understand risk vs reward, know your risk tolerance, protect your assets, avoid bad debt, etc.  Most of us know that stuff.  Following them is a different matter. We are all human, and our behavior frequently gets in the way.

3.       There are nuances.  Although most of my clients are physicians, not one of their financial situations is the same.  It is in those nuances where a good financial advisor creates value.  Being able to see the whole picture, looking for holes or traps that may have been overlooked, keeping up to date on the changes in laws and regulations—that is what an advisor should be doing for you.

4.       Ownership leads to success. To maximize your financial future, you need to be intentional and take ownership of your own success.  That doesn’t mean you have to do it all on your own. But you need to have a plan and know who is playing what role within it. 

To borrow some designations from Jim Dahle at the White Coat Investor, there are three types of people when it comes to managing their own money (I added the fourth):

1.       Do-it-yourselfers (DIY):  These are the people who really enjoy learning about personal finance. They are avid blog readers, podcast listeners, book finders and individual investors.  Some become so good at it that they begin coaching or advising others.  As a DIYer, it is hard to understand why anyone would pay for things you could do on your own.

2.       The Validators:  These are the folks who enjoy learning about finance but don’t have full confidence that they are not missing something or making mistakes. Or they just don’t have time to figure it all out.  They feel like they can do most things on their own but would love a professional second opinion.

3.       The Delegators:  This is the group who would much rather pay someone than spend their precious free time learning about and managing their money.  They know what they are good at and know when it makes more sense to pay for help.

4.       The Do Nothings:  These are those who are just not paying attention.  They assume that everything is going to work out just fine.  After all, they are doctors and make a lot of money, right?

So, which camp do you fall into?  If you are a DIYer, there are plenty of resources out there to learn.  My advice:  if you are going to do it that way, do it well.  Take the time.  Read. Learn. Talk with others. Beware of the sales pitch traps. Doctors are susceptible.

If you are a validator, it is a little bit more challenging.  The financial industry is set up for delegators.  There are fewer financial advisors that will just review a portion of your plan at an hourly rate. They do exist, though.

If you are a delegator, the next section is for you.  I’ll help you understand the different types of advisors and how to select the right one.

If you are a do-nothing, best of luck.  I hope it works out for you, but I wouldn’t count on it.  If you are not paying attention, you are almost surely losing money and sometimes going down a road that might lead to financial catastrophe.

Ok, advisor types.  I divide them into four types as well:

1.       The Salespeople:  These are the “fee-based” advisors that work for insurance companies and brokerages.  This is the largest group and are often the source of the horror stories.  They are paid primarily on commissions from products they are “advising” you to buy—be it a whole life insurance policy, an annuity, or a mutual fund with a load.  It is often not clear how much they are making from you, or it is buried deep in their fine print. Sometimes they even offer “free financial plans”.  All I can say is “buyer beware!” Their fiduciary standard only requires choosing things that are “reasonable”, not necessarily what is “best”.  And most often, what is reasonable to them is what makes them the most money.

2.       The Investment Managers: These can be either “fee-based” or “fee-only” but charge you a percentage of assets under management (AUM).  A 1% yearly AUM fee is typical but often reduces as you invest more assets, but I have also seen plenty of fee structures that go up to 2% or even higher.  Financial plans are often included in the AUM fee.  However, my experience is that they are more interested in investing your assets than doing full-service planning.  And many don’t even do a great job with your assets (e.g. selecting high-fee, underperforming, actively managed funds.)  All those fees can add up. Be sure the value equates.

3.       The Financial Planners:  These are “fee-only” advisors (no commissions) who focus on creating a comprehensive financial plan covering your entire financial life, not just your investments.  Some couple this with investment management and charge you an AUM fee.  Others do the planning only, for a flat fee.  In my opinion, it is in the comprehensive planning process where a financial advisor provides the most value. If your advisor is not doing that well, you are probably overpaying and missing out on the true value. 

4.       The Hourly Validators:  As mentioned above, this is the smallest group.  It is a more challenging business model and harder for the advisor to give the best advice without understanding your full plan. It can work well for focused projects.

If it wasn’t apparent, I am strongly partial to the third group.  I think that is where you get the best service and value.  Beyond cost and fee-models, it is important to understand your potential advisors’ experience, credentials, and availability.  Do you trust them?  Do they understand you? Are they good communicators? Are they accessible? Will they be a good partner?

Like anyone else that you are hiring for your medical practice or business, do some interviews.  Look around.  Ask questions.  Get references.  Your financial advisor is an important part of your team. Be sure they are the right fit. If not, look elsewhere.  There are advisors out there who are in it for the right reasons and, like any good athletic coach, can help you achieve your goals—faster, stronger, healthier, and with fewer injuries.

If you are curious if we would be a good fit for you, schedule a free exploratory call here.  We are fee-only financial planners that charge a flat annual fee. For those looking for asset management as well, we do that for a much lower-than-industry-average AUM rider. 

Disclaimer: the material in this blog post is intended for general educational purposes only and should not be considered specific financial advice. You should always consult with your personal financial advisor to see how it might fit within your personalized financial plan.

Disclaimer: The content in this blog is for educational purposes only and should not be considered financial advice. You should always consult with your own financial advisor to see how any of it would fit into your personal financial plan.