Day after day I read articles from people suggesting that investors should “do it themselves.” They suggest that the fee advisors charge is just a “cost” and ignore the benefits.

They make a case that seemingly makes sense, and in the backdrop of an industry (financial services) that is one of the least trusted, their case is evermore convincing. But are they right?

A Financial Advisor is More than Just an Investment Portfolio

The premise of those that argue a financial advisor is simply an unneeded cost is one centering on investing only. Under that premise, I would agree that portfolio management itself is worth a very small fee at best.

Over the past couple of decades, the democratization of investing has increased the number of practical investment vehicles while driving down the costs to almost zero…and in some cases, zero. Nobody should pay an advisor a 1% fee for a diversified investment portfolio you can have practically for free.

But what people who suggest advisors are not worth a 1% fee seem to miss is the number one reason most investors underperform their own investments: human nature.

Human nature is a failed investor. We are hardwired to move away from things that cause us pain and toward things that bring us pleasure. It’s primal, and it shows up in the behavior of even the most intelligent investors in a couple of ways.

Waiting on the Sidelines for Things to Look Better

Most people know they need to be invested for long time horizons, which means investing any money they have as soon as possible. Seems easy, but in practice can be very difficult.

Sometimes people will swear they are going to invest everything today.

But just about the time they are going to execute their investment plan, they hear some pundit or negative nabob on CNBC say the world is coming to an end by noon tomorrow, and they get a bit scared to do it today and decide to wait until tomorrow to see how things are. But tomorrow becomes “today.” They can always seem to find the reason de jour to postpone implementation.

It never gets done. They are waiting for things to “look better”, not realizing that by the time things look better, prices will be higher. They then convince themselves that the market is “too high” now and wait for the pullback that never gets back to the dock to pick them up.

I can tell you this, I have never met or will never meet anyone that doesn’t wish they did it (invested their money) when today was in 1984 (the year I began my career). But it was often very difficult to invest that money to begin with, and often even more difficult to keep it invested.

Panic at the First Sign of Danger

Some investors will go right out and get the money invested quickly, exactly as they should. But like clockwork, at some point in the near future, we will go through a typical stock market decline or bear market, and that sweet couple will sell those investments out of fear of course.

They fear a permanent loss, not recognizing that if they were to remain diversified as they know they should, there in fact is not risk of permanent loss, as creating a permanent loss takes human intervention.

Welcome to the human race. Most of you reading this are one or the other type of investor, whether you want to admit it or not.

Is a Financial Advisor Worth It?

Someone that says paying a qualified, caring and knowledgeable planner and advisor is a waste of money never had to sit with a couple with three decades of a rising cost retirement ahead of them and convince them that selling into the weakness of the great recession would be the worst mistake they could possibly make.

They do not and will not ever recognize that investment performance does not result in investment success or failure.

Investor behavior does.

They do not realize that real humans, intelligent ones at that, make the same mistakes over and over and at the most critical times.

I did sit with those retired folks—real people—during the scariest and most difficult times to ever stay the course and stick with their investments. I indeed did tell them that “this too should pass” and “you don’t want to do that”… the ten most valuable words they have heard in their lives—financially speaking.

Believing those words—trusting the person uttering those words would turn out to be the difference between maintaining their financial independence and financial ruin.

If you are one of the lucky few that can look in the mirror and know that you are not the type to fall victim to these bouts of human behavior that seem to impact just about everyone, congratulations. If you count yourself among the one out of 10,000 that have the interest to do it yourself, you will also need math skills that are well beyond simple spreadsheet stuff, the historical knowledge of all past bubbles and manias and most importantly—the ability to execute your investment plan come hell or high water.

For the rest of the folks, paying an annual premium of one cent on each dollar of your invested assets for the comprehensive financial planning, historical perspective, and behavioral counseling you will surely need to guard against the tragic effects of our universally hardwired human nature, might just be the most valuable insurance you will ever buy. In my experience, it is always paid with happy dollars.