Financial Advisor vs. Do-It-Yourself Investing

CFP® Certificants in the News

There’s an old pilot’s joke about the increasing automation of the cockpit that goes something like this: The ideal flight crew is one pilot and a dog. The pilot’s role is to feed the dog. The dog’s role is to bite the pilot if they try to touch any of the controls. Joking aside, how safe would you feel with your and your family’s lives in the hands of a set of algorithms in sole control of the flight?  CFP Board weighs in on the financial equivalent to aircraft automation with an article from MarketWatch. The article poses a thought-provoking question followed by a sobering answer.


What are the pros and cons of working with a financial adviser? Plenty of people should say ‘to [heck] with the adviser’ because they can just use index funds [or ETFs] and call it a day. Right? What am I missing?”


“It’s true that not everyone needs a financial adviser — and it’s true that index funds [or ETFs] can be a low cost and effective way to invest. But that doesn’t mean this is the right path for most people, pros say. Some people – especially those who aren’t as well versed in finance or who don’t want the responsibility or stress of managing their own money – might benefit from a financial adviser.”

Yet, in the author’s opinion, there is another compelling reason to rely on a financial advisor.  For context, one famous investment theory posits that investors are rational thinkers—they seek gain with the same enthusiasm that they fear loss. If that were consistently true, our next point would not exist.

Why Do Clients Buy High and Sell Low?

Behavioral psychologists explain this confounding dynamic through several overwhelming influences of which we’re not consciously aware. You may be alive to read this article because of one such influence—herd mentality. In millennia past, our ancestors formed groups (herds) to avoid being eaten alive by predators like the saber-toothed tiger.  Here’s the short version: the herd mentally helped our ancient ancestors eat instead of being eaten.

But, unfortunately, that very same herd mentality can trigger our survival instincts today when our lives are not threatened. The threat of an investment loss triggers an adrenalin-fueled fear of being eaten alive in our primal brain. Our overwhelming emotional response to that fear can drive us to liquidate our portfolio and go to the “safety” of cash. Similarly, investors who buy near the top of the market may be reacting instinctively to that same overpowering, survival-based need for the “safety” of following the herd.

The Bottom Line

We don’t recommend advisors bite their clients when they attempt to buy high or sell low (that would be rude in polite society). But here’s a key takeaway—a financial advisor can give us rational guidance, which can be as important as investment advice during turbulent markets. Specifically, they can help us take a deep breath, rise above primal fears, and respond rationally when the market changes.

Financial advisors and planners need a sound understanding of the competitive edge of joining the ranks of highly-trusted financial professional. Get that sound understanding through our CFP® Curriculum when you consider CFP® certification. You’ll discover a select few of the reasons our student pass rates are much higher than the national averages.