Should I Pay for Financial Advice?

Starting Out and Seeking Advice

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 advisers would say come back when you have six figures to invest. How was I supposed to get to six figures in the first place?

Some were happy to meet with me for an introductory, no-obligation meeting. I realised that they were trying to get me 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 because they get a kickback from a pharmaceutical company.

The Doctor Who Treats Themself

In medical school we were taught the doctor who treats themself has a fool for a patient. The Frugal Doctor 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 quite the diagnosis; some are a genuine 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 don’t have cancer after all, or a rare autoimmune condition.

Am I My Own Dr Google?

If I was going at this personal finance without professional advice, was I doing a Dr Google on myself? I’d read so many personal finance books and listened to so many podcasts. I had perfected my do-it-yourself (DIY) financial plan.

In the end, I felt like I still needed to consult a professional. The cost was $4,840 for a year’s worth of engagement. Fortunately, I paid the entire cost through a personal contribution to my superannuation, which meant the whole amount was tax deductible.

What the Adviser Found

So was the cost worth it? The financial adviser 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 available for premium and coverage. They suggested I get rid of the trauma, disability and life insurance, a saving of $1,305 a year. I did have 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 three indexed options. They suggested I drop one of them, which would see the overall return increase by at least 1.5%.

Reviewing My Investments

I had been thinking about whether to move away from the mutual index funds I hold on Vanguard Personal Investor, and concentrate more on exchange-traded funds (ETFs), which I hold on Pearler. I’d read about tax inefficiencies of mutual funds but I love that with 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 didn’t have to wait for the sum to be large enough, which is otherwise necessary when purchasing ETFs with a brokerage fee. Fortunately, Pearler now has an auto-invest feature so the ETF purchases are automated too.

Their advice was that I didn’t need to change my holdings. I could have both. My asset allocation was already in line with my risk profile, so I didn’t have to change that either.

Estate Planning and Clarity

I had also been procrastinating on getting a will. Knowing I was going to catch up with the adviser again gave me the impetus to get the estate planning done. They had recommendations for a lawyer; however, I chose one in the town close to where I live.

Most of all, saying my goals out loud and having them written down and modelled was a moment of great clarity. We modelled various scenarios: 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 investments motivated me. It gave me the incentive to semi-retire. I decided to decrease the working days further and take my first mini-retirement earlier than planned.

Was It Worth the Cost?

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. At 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 didn’t feel I needed ongoing advice, so I happily parted ways with the financial adviser.

If you are looking at getting financial advice, make sure that the adviser is independent and has a transparent fee for service. You can manage your DIY investments if you choose to. You’re not beholden to percentage-based fees on 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.