Does it surprise you that 99% of Americans do NOT use financial planners to manage their money? It doesn't surprise us.
Many of the reasons Americans don't use financial planners are personal:
The other reasons Americans don't use financial planners have to do with financial planners themselves. The truth is the 99% of Americans who don't use financial planners - and I would even say the 1% that do use financial advisers - are (or would be) better off managing their own money.
1. You're Better Off Investing in the S&P 500
Putting your money in an S&P 500 index fund and forgetting about it will almost guarantee you higher returns than relying on a financial advisor. The financial media, as well as S&P Global, have reported that over the past 15 years the S&P 500 has beaten large-cap mutual funds 92.2% of the time.
The S&P 500 consistently outperforms financial planners because when you factor in high, percentage-based fees that financial planners and fund managers charge, returns from managed money fall short of S&P 500 returns. Because of the fees, your returns almost always end up being less than if you had put your money into an S&P 500 index fund.
2. Few Financial Planners Beat the Market
Even the best of the best finance managers fall short of the S&P 500. Large-cap fund managers – considered the most elite of financial planners – are beaten by the S&P 500 a brutal 92.2% of the time.
3. They Make Money no Matter What
Financial advisor fees are transaction-based and not tied to performance. This encourages fee-churning and explains why any returns a financial advisor may generate are swallowed up by their fees. That's why they rarely ever beat the market.
So even when you lose money, they still get paid. This not only encourages fee-churning but also gives them less incentive to perform well while exposing your portfolio to unnecessary risk because they put less thought and care into their investment decisions.
4. Financial Planners Think Short-Term
You're better off investing for the long-term, investing in productive companies or assets that provide cash flow with long-term appreciation. Financial Planners don't invest long-term. They wouldn't make any money.
Take Control of Your Investments
For those seeking financial independence, financial
planners are not the way to go.
If you can learn anything from wealthy investors, it's that you're the one that has to make it happen. But where to start? Study the habits of the wealthy. Here are some starters for you:
1. Generate Multiple Streams of Income. Unless you create multiple streams of income, you'll always be overly dependent on your job. By diverting part of the income stream from your job to investments that generate passive income streams, you're able to make more money without working more hours. Your mindset should be to both a) increase your current income stream and b) create multiple streams of income so that you aren't dependent on a single source.
2. Look for a Partner to Invest in Real Assets or a Productive Business. By partnering with experienced investors with boots on the ground, you can put yourself in the position to maximize your opportunities. It will be impossible for you to be an expert in multiple markets in multiple asset classes. Find different partners with expertise in specific markets and asset classes to diversify your portfolio and maximize your potential for success.
3. Seek Out Productive Assets or Businesses. Only passive income-producing assets will allow you to compound your wealth. You invest $100 in a productive asset paying 20% a year will let you make 20% on $120 the next year and 20% on $144 the year after that and so on. Speculative investments can't offer income streams and compounding.
4. Use Automation to Invest a Portion of Your Income Automatically. If you don't want to think about your investments, many private investment funds are now so technically savvy that they offer automatic deposits for initial, as well as incremental investments.
Financial planners will not make you rich. In fact, chances are they could make you poorer. That's why 99% of Americans don't use their services. There are better ways to beat the market and, more importantly, to generate and preserve wealth.