As a former financial advisor myself, I’ve seen behind the curtain. The statistics are troubling: while 80% of people like their financial advisor, they typically fire them every 3-5 years. Something clearly isn’t working in this relationship.
When I was a financial advisor over 20 years ago, I was essentially a salesman in a suit. I was licensed not to make you money, but to sell you products. This harsh reality became clear when I examined my father’s finances and realized he’d need to work into his 70s despite following traditional advice for decades.
The wake-up call came when someone asked me: “How many of your clients are actually financially free where they don’t worry about money?” The honest answer was none. Then came the follow-up: “How many of you financial advisors are financially free from your own investments, not commissions?” Again, none.
The Uncomfortable Truth About Retirement Planning
The statistics paint a grim picture. According to Fidelity, less than 2% of their 401(k) account holders have a million dollars or more. Even with that million, financial advisors recommend withdrawing only 3% annually—just $30,000 a year. Is that enough to live on?
Transamerica surveyed people with million-dollar retirement accounts and found 35% said it would take “a miracle” to retire. This is the reality of traditional financial planning—even the “successful” savers don’t believe they can retire comfortably.
Financial advisors get paid whether you make money or not. As long as you have assets under management, they collect their fee. The market goes down? “Buy more, it’s on sale!” The market goes up? “Keep buying, it’s working!” Either way, they get paid.
Seven Questions to Ask Any Financial Advisor
If you’re considering working with a financial advisor, here are seven critical questions to ask:
- Experience: Have they been through market cycles? Most advisors don’t make it past their second year, and many today have only experienced a bull market since 2009.
- Independence: Are they captive to one company, or can they offer solutions from multiple providers?
- Fee Structure: Are they commission-based, fee-based, or both? Commission-only advisors face inherent conflicts of interest.
- Risk Philosophy: Do they say “high risk creates high returns”? If so, run away. The definition of risk is “chance of loss”—when did a high chance of losing become a high chance of winning?
- Cash Flow Focus: Do they focus only on the distant future, or do they help improve your financial situation today?
- Expert Network: Do they have a team of specialists, or are they trying to be a jack-of-all-trades?
- Financial Independence: Could they live off their investments if they stopped working tomorrow?
That last question is particularly revealing. Very few financial advisors could survive on their investment returns alone. Most make their money from commissions or fees, not from following their own advice.
Finding a Better Approach
I believe in a different philosophy: low calculated risk can create the highest returns. I focus on cash flow today, not just decades from now. And most importantly, I practice what I preach—I’ve achieved financial independence twice by age 39.
When looking for financial guidance, find someone who’s been where you want to go. Don’t follow people who haven’t accomplished what you’re trying to achieve. Question everything, but be willing to learn from those who have actually succeeded and continue to practice what they teach.
Remember, you’re the boss when hiring a financial advisor. You’re not begging them to work with you—you’re determining if they’re the right fit for your financial future. The right advisor should help you prosper, not just collect fees while you hope for the best.
Frequently Asked Questions
Q: How do I know if my financial advisor is truly working in my best interest?
Ask them if they could live comfortably off their own investments right now. Also, find out if they’re fee-based or commission-based, as commission structures can create conflicts of interest. Finally, see if they focus on improving your cash flow today or just talk about distant retirement goals.
Q: What’s wrong with the “high risk creates high returns” philosophy?
Risk, by definition, is the chance of loss. If something has a 90% risk, that means it has a 90% chance of losing money—not winning. Financial institutions promote this idea while they take guaranteed fees regardless of how your investments perform. There are ways to achieve good returns with lower, more calculated risks.
Q: Why do most people fire their financial advisors after 3-5 years?
Despite initially liking their advisors, people eventually realize they’re not seeing the results they expected. Traditional investment approaches often deliver mediocre returns despite high risk, and many advisors focus more on collecting fees than creating actual financial freedom for their clients.
Q: Is a million dollars enough to retire on?
With traditional withdrawal rates of 3-4%, a million dollars only generates $30,000-$40,000 annually. That’s why 35% of millionaire retirement account holders say it would take “a miracle” to retire. This highlights the problem with conventional retirement planning—even those who follow the rules often can’t achieve true financial freedom.
