When I started the journey of building wealth. I remember in my first year of working as an intern trying to get financial advice. Some advisors would say come back when you have six figures to invest. How do I get to the six figures? Some were happy to meet with me for an introductory no obligation meeting. TheFrugalDoctor realised that they were trying to get them onto their products. They could not make other recommendations. This was a red flag. It’s akin to visiting a doctor who prescribes only one medication. They do this because they get a kickback from a pharmaceutical company.
In medical school we were taught the doctor who treats themself has a fool for a patient. TheFrugalDoctor has seen many patients come in with their Dr Google diagnoses. Some are so far from what’s going on, some are close to the picture but not the diagnosis. Some could be a possibility. When a patient comes in with their Dr Google diagnosis, I explain why it’s not this or why it is. I make it a point to clarify the reasons. If appropriate I run some tests taking their concerns into consideration. In the end they are happy that they do not have cancer after all or a rare autoimmune condition.
If I was going at this personal finance without professional advice was I doing a Dr Google myself? I have read so many personal finance books listened to so many podcasts. I had perfected my DIY (do it yourself) financial plan. In the end I felt like I still needed to consult a professional. The cost was $4 840 for a years worth of engagement. Fortunately, I managed to pay the entire cost through my superannuation. As a result, it was all tax deductible because I contributed the same amount into the account.
So was the cost worth it? The financial advisor managed to add a lot of value. Turns out I was on the right path but there were some areas of improvement. The insurances I had were the best premium and coverage wise. They suggested I get rid of of the trauma, disability and life insurance. This would be a saving of $1 305 a year. I had to increase my income protection cover slightly but this would be a fully tax deductible expense. My superannuation (tax advantaged retirement accounts) had been split between 3 indexed options. They suggested I drop one of them that would see the overall return increase by at least 1.5%.
I had been thinking of whether to move away from the mutual index funds on Vanguard personal investor. I was considering concentrating more on ETFs (exchange traded funds) which I hold on Pearler. I had read about tax inefficiencies of mutual funds. I love that with the mutual funds I can invest small amounts consistently. When I started the financial independence journey, it felt doable to invest a small amount each fortnight by direct debit. I did not have to wait for the sum to be large enough. This is necessary when purchasing ETFs with a brokerage fee. Fortunately Pearler now have an auto invest feature so the ETFs purchases are now automated. Their advice was I did not need to change my holdings I could have both. My asset allocation was in line with my risk profile I did not have to change that.
I had also been procrastinating getting a will. I knew I was going to catch up with the advisor again. This was an impetus to get the estate planning done. They had recommendations for a lawyer. However, I chose one that was in the town close to where I live. Most of all saying out my goals and having these written down and modelled was a moment of great clarity. We modelled various scenarios with mortgage clearance, retirement account contributions, increased expenditure and a year long mini-retirement. In the end, seeing that I was on the right track to retire early with more than enough motivated me. This gave me the incentive to semi-retire. I decided to decrease work to part-time and have the first mini-retirement earlier than planned.
I feel that the professional advice was worth the cost. I still go back to the statement of advice and one year record of advice. On the one year review, we updated the modelling I was ahead of the projections. My net worth had increased by $238 000 in a year. I did not feel that I needed ongoing advice so happily parted ways with the financial advisor. If you are looking at getting advice make sure that the advisor is independent. The have a transparent fee for service. You can manage your DIY investments if you choose to. You are not beholden to percentage fees of total holdings. Personal finance is personal. Personal finance is behavioural. It helps to get professional advice if in doubt.
The doctor who treats themself has a fool for a patient.