Why I “Fired” My Financial Advisor

Image by Gerd Altmann from Pixabay

Okay, I didn’t really “fire” my financial advisor as much as decided to completely ignore his advice. His advice was conventional, safe, and likely something many of you have heard. I, on the other hand, have a hard time with conventional wisdom, avoiding risk, and following the crowd.

The piece of advice that I couldn’t help but ignore was my financial planner’s views on saving for retirement and long-term investments. For two and a half years, I followed the plan. Put a percentage of your income into XYZ mutual fund and continue on your way focusing on other aspects of your life and not your financial future.

The entire time I couldn’t help but feel uneasy because I knew there had to be a better way (at least for me.) Admittedly, I have some issues with control, but I also believe in doing things based on a large body of research and study. When I learn about new things, I don’t just learn them halfway. I learn everything I can possibly learn about them until I cannot mentally handle it anymore. I hadn’t done any of the legwork on long-term financial planning and investing. I was walking blind.

At the same time, I am an extremely value-driven individual. If I am doing something that goes against my values, I have a very hard time ignoring it. When I would look at the stocks in the mutual fund, I would look through the companies in its holdings and cringe. I didn’t like any of the companies! They weren’t necessarily bad companies or bad investments, but many of them represented something that I fundamentally would like to see change in our world. In short, I owned companies I wanted to fail.

It’s not surprising then that I would be drawn to a financial plan where one of the mottos is, “Invest in the future you would like to see.” THIS is value-driven financial planning and investing. THIS is something I can get behind and get excited about. THIS will also require an active role in my financial future.

A Deeper Look at Mutual Funds

I decided to dig deeper into investing because I know how important it will be for my family’s financial well-being. I started to question even more my mutual funds. Imagine my surprise when I discovered that two of the mutual funds I held the last two and a half years did 42% and 35% worse than the S&P 500 (the general benchmark for how much the market is growing.) Even if you know nothing about investing, you know that those numbers are really bad. In fact, over the long-term 80-90% of mutual funds will underperform the market indexes. This is well-documented and highly verifiable research.

If the mutual funds can’t even match the market, why would I ever want to own them? This is exactly the reason I am “firing” my financial advisors. I’m not firing the advisors because I think they are bad people. I actually quite enjoy them, but I cannot follow advice that I completely disagree with and very likely harms me financially in the long-term.

I know at this point in the blog someone is bound to either phone me up and ask me what my investing strategy is or to talk me out of straying from the financial roadmap setup by the financial advisors. I know this is possible because straying from the “normal” is scary and it makes people uncomfortable. Yet, has anyone ever accomplished abnormal by simply sticking to the norm. I could go on and on about this, but it is clear to me that our perception of risk is often distorted. To me, it would be riskier to hold only mutual funds than to hold only individual stocks. If fact, history actually supports the individual stock theory quite well.

Value-Driven Investing

I personally do not want to hold a stock that doesn’t align with my values. I do not want to profit off of something that I feel hurts others or hurts the world in the long-term. To the extreme level, this could lead you to never invest in anything, but it is a very important part of investing for me. I need to believe in the company.

Because of this value-driven approach, I have no plans of owning companies such as Facebook, Walmart, Coca-Cola, or McDonald’s. There are significant parts of these companies that I fundamentally cannot agree with and therefore do not want to own them. This may be more important for me than for other people, but for me it matters. I want to know my money is invested in something I strongly believe in.

My new approach to investing is ever-evolving and I am learning new things every day. I won’t be the same investor today as I am ten years from now. I will grow and continue to learn. I am not yet and expert, but I am working on becoming one.

Should You Join Me in “Firing” Your Financial Advisor?

Is it also time for you to ignore your financial advisor’s advice? This is a deeply personal question that only you know the answer to. I have very specific goals and values that motivate me to approach this process as I am. Your goals and temperament are different than mine. There is no roadmap to life. Everyone has different gifts, wants, and needs. Every situation is unique.

I do want to encourage you to take a closer look at your financial future and take hold of the reins. This might not mean firing your financial advisor, but it will mean taking the time to learn as much as you can so you can really understand money. You might discover you have a great financial advisor currently or you will decide that maybe you would be better off on your own or with someone else who is more aligned with your financial goals. Doing anything else just seems too risky to me.