I recently sold my house and got some money, which caused me to pause and wonder, “should I get a financial planner?”

I used to be a financial planner for several years.  Before that, I worked on Wall Street and before that I got an Honors Bachelors Degree in Finance and an MBA in Accounting.  I’ve read hundreds of books on investing.  So I know a little about the subject.  But I wondered, financial planners do this for a living, so could they add more value and do better than I could do for myself?

After much thought and research I concluded that a financial planner wasn’t for me, but may be useful for some people.

What financial planners do

A good financial planner will help you plan your finances, save for retirement and choose investments for you. He or she can project what you’ll need to save and invest to reach your goals. An educated one will know the tax laws and can recommend the most efficient way to invest your money and where it should go.

They also help with life insurance, disability and health insurance and financial aspects of a business, if you have one.

In my experience, most financial planners are well-educated and on top of the latest tax changes and honestly try to do what’s best for their clients.

Who should have one

I have a good friend who just got a financial planner.  He’s a very smart guy. I’d put him in the top few of the people I know in terms of intelligence. If he’s so smart, then why did he get a financial planner and not do it himself?

The short answer is he has no interest in learning it. I asked him what his planner had him investing his money in and he had no idea.  He just invests money every month and it goes wherever the advisor decides to put it.

Doing something like that takes a lot of trust and confidence. Not something I would do, but he’s happy with it.  He’s the type of person who should have a financial planner.  Not everyone wants to spend their nights and weekends reading the updated tax code and thinking about early retirement strategies or college funding. Those people are in the far minority.

Most people would do well to have a financial planner because financial literacy in the world is abysmal. The vast majority of people don’t know anything about money and they don’t care to. Maybe that’s why so many Americans are broke, despite living in the world’s largest economy that’s experienced a recent 10 year economic boom.

Add to that the fact that people have a lot going on with their jobs, kids, commuting to work, 5 hours of TV and 3 hours of internet surfing every day. When does anyone have any time to manage their finances?

Lastly, is interest. My friend is interested in other things, like spending time with his family or building his company. He relies on an expert to guide him on his finances. Much like people rely on their accountant, attorney or doctor to give them advice. DIY isn’t for everyone and that’s okay.

The downsides of having a financial planner

That, however, comes with a cost. The expert advice will cost you about 1% of assets under management (AUM), which may not sound like a lot, but it adds up.  For example, if you have $100,000 invested, you’ll pay $1,000 per year. The stock market averages about 10% over the long-run, so with an advisor you’ll get 9%.  In addition to that, the advisor may recommend investments that have their own fees, such as load mutual funds, costly insurance or funds with high expense ratios. Your fees could end up being 2-3%. That’s an expensive drag on your returns.

The second big downside is you lose control of your investments. You put someone in between you and your money. In some advisory practices you’re required to request withdrawals from the advisor instead of doing it yourself. The fund companies deal with the advisor, not you. What happens if you get a financial planner who his not good at customer service? You have to wait to get your money.

With someone handling your investments, there’s less incentive to learn about it yourself.  Some people don’t want to learn, but it should be recognized what you’re giving up by turning it over to someone else.

The financial planning industry incentivizes insurance-based products like annuities and whole life, so the advisor gets paid many times more for recommending you put that $100,000 into an annuity than for putting it into a low-cost index fund. With all the fees that theses products have, it could really cost you. If you do have an advisor, it’s wise to work with him or her to be educated about what they’re doing with your money and not just turn it over to them and hope you can show up at retirement to collect your check.

The biggest benefit of advice

The most useful benefit of having a financial advisor is to keep you from doing stupid things with your money. That may sound like not a great reason, but it’s surprising how often everyone acts foolishly with their money.

Most people lose money in the stock market and there’s a good reason. It’s not the market’s fault. It’s because people are emotional, especially when it comes to their money. They get stupid.

Everyone knows the secret to investing, “Buy low. Sell high.” Most people do the opposite. They buy high and sell low.

Last year cryptocurrencies hit an all time high. Everyone was talking about it. I bet you had friends and family telling you that you’ve got to get into crypto because it’s so hot. Millions of people around the world bough in at the top. Then the bottom fell out and crypto tanked. What did people do? They sold and the price went down ever more. So more people sold.

Buy high. Sell low.

It’s experiences like this that make people think the stock market is rigged or only for rich people. They’ve been burned because they did it wrong. They tried to “play” the market. Maybe they picked a hot stock that also tanked. Trying to be like Warren Buffett never works out and people get discouraged. Never to return to investing.

Why I don’t use an advisor

So I don’t use a financial advisor, not because I think they’re crooks or don’t know what they’re doing or because I think I know more. It’s because I want to play an active role in my investments and financial planning. I want to keep myself educated and learn about what’s best for my money.

In addition and probably just an importantly, I want that hard-earned money to work for me as efficiently as possible, which means keeping things simplified and reducing all the fees I pay along the way as much as possible.

Related: The employee every business owner needs now

For all investing articles, see The Financial Independence section.