Are DIY investors a threat to financial advisors?

Posted: May 7, 2013 in Uncategorized


As baby boomers age, more are in need of financial and investing assistance to guide them through the retirement savings and retirement spending years. This cohort are prime candidates for the services of financial advisors, especially since retirement planning and distribution continue to grow in complexity.

But as distrust of the financial services industry grows in the wake of the financial crisis and the Bernie Madoff scandal, more of these investors are either completely going it on their own — a true do it yourself (DIY) investing approach — or employing a modified DIY approach by affiliating with a mutual fund or discount brokerage firm to receive financial advice and account services on a significantly less expensive basis than it would cost to engage a financial advisor. So reports the Wall Street Journal.

The interesting question in all this is whether the numbers of investors going it alone are significantly higher today than they were in the past and how this trend — if it is one — impacts financial advisors. There is no doubt that there are more resources than ever before for investors who are interested in either going it completely on their own or who are so-called “modified” DIYs who will pay modest fees for financial advice.

Vanguard, for example, charges a flat fee of $250 for a financial plan for investors with between $50,000 and $500,000 at the firm; those with a higher amount of assets get financial plans for free. And there is no doubt that custodians like Vanguard and Fidelity have a leg up when it comes to gaining assets on 401(k) rollovers.

In addition, competition from the Vanguards and Fidelitys is no doubt contributing to fee pressure across the industry. Advisors of all stripes are under pressure to prove their value add to clients and potential clients.

That being said, it’s my conviction that financial advisors who have a clearly defined niche, deliver a high level of personalized service and know their clients needs and meet those needs don’t have much to worry about. In fact, most of the advisors I know who are successful enjoy working with clients who are knowledgable and who want to be involved in the financial and investment planning process.

The best advisors in the business — who are not necessarily those with the most in assets under management, though the two are certainly not mutually exclusive — thrive on working with knowledgable clients who challenge them. They want to work closely with these types of clients to help them succeed financially and create a secure future for themselves and their families.

Even the most dedicated DIY investor — myself included — can benefit from the objective opinion of a financial advisor experienced with our specific financial issues and concerns. And with the growth of fee only financial advisors, it’s very possible for “us” to find an advisor to work with on specific issues such as creating a financial plan, examining risk management issues and figuring out a retirement distribution plan.


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