Couple preparing to sign a contract of sale and having second thoughts.

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Hiring a financial advisor doesn’t have to be something reserved for millionaires. While some advisors require a minimum amount of assets to get started, plenty of advisors are willing to work with people of all financial situations.

A good financial advisor can help you not only select investments but also manage areas like budgeting and taxes. You don’t have to be wealthy to benefit from this advice.That said, financial advice typically comes at a cost, and there might be times when you’re better off forgoing a financial advisor — some of which are outlined below.

1. Your Finances Are Simple

If you have a simple financial situation, you might not need to pay someone to help you manage your finances. For example, if you earn a stable salary where your employer withholds taxes, you participate in a workplace retirement plan, and you don’t have any dependents, then you might be fine on your own, especially if you’re comfortable doing a little research.

“Almost every question imaginable can be answered using a search engine,” noted a Kindness Financial Planning article.

2. You Know the Basics

Even if you have a slightly more complicated financial situation, such as if you’re self-employed, you don’t necessarily have to hire a financial advisor if you know the basics of personal finance. 

For example, you might know rules of thumb like investing 15% of your gross income for retirement. And when you do invest, you might be comfortable opening accounts on your own and building a diversified portfolio with low-cost index funds or passive exchange-traded funds (ETFs).

3. The Fees Are Too High

Another reason to consider forgoing an investment advisor is if the fees are higher than you’re comfortable with. Many financial advisors take a percentage of your assets annually, such as a 1% fee. While that might sound small, it adds up, especially over time as your wealth grows.

Over a lifetime, that 1% fee can amount to roughly 25-28% of your returns, said Ramit Sethi, author of “I Will Teach You to Be Rich,” via TikTok.

One alternative to consider is a flat-fee or hourly financial planner who you can pay for specific services, like building your initial financial plan. That might cost anywhere from a few hundred to a few thousand dollars, but it can be cheaper in the long run.

4. You Don’t Think They Add Value

Numerous studies show that most actively managed funds can not consistently beat index funds after fees. For example, 92% of U.S. equity funds underperformed their benchmarks over a 20-year period as of the end of 2022, per S&P Dow Jones Indices.

Considering that, paying a financial advisor to pick stocks or choose from different mutual funds might not be worth it if you can invest in index funds or passive ETFs on your own. Some financial advisors add value in other ways, like helping you construct a portfolio based on your risk tolerance and guiding you away from bad decisions, like panic selling. But if you’re just looking for an advisor because you think they can beat the market, you might want to avoid playing that game.

5. You Can Leverage Technology

If you meet some of these criteria, like having relatively simple finances and not wanting to pay high fees, but you still want some help, you might be comfortable leveraging technology. There are several robo-advisors to choose from that use automation to help you build and manage a portfolio, without having to speak to a human. Or, you might use technology like a brokerage app that makes it easy for you to invest in index funds.

See What’s Right for You

These are some of the top reasons why you might forgo a financial advisor, but everyone is different. Consider what makes you comfortable, and know that many decisions are reversible. It’s not as if starting on your own means you can never go to a financial advisor later in life, nor does having a financial advisor mean you can’t move on from them if that feels right to you.

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