Financial Advisor: Asset Enhancer or Waste of Money? Like Lingerie

Deciding on an accountant and financial advisor are critical decisions for your financial success. In my last post, I talked about the choosing the right accountant. Having an accountant is like underwear – not really optional for most people.

A financial advisor is more like lingerie:

  1. It tends to be sexier. Seriously – I have not met very many advisors who were not attractive and well-quaffed people. Be careful, it may look better on the model in the store than it does when you take it home.
  2. It can be an optional item and the need for it may change at different points in your life.
  3. You might go for a bit more “racy” when younger, but going a bit more “conservative” as you age is likely for the best.
  4. You can save a lot of money if you have the confidence and know-how to go without it. I should also mention the discipline needed to stick to a financial plan. However, talking discipline and lingerie is a bit too riskée even for me.
  5. The cost does not necessarily correlate with the size of the merchandise. You could pay a lot for very little if you are not careful.
  6. You generally should be careful about buying lingerie from the bank.

Do you need the help of some lingerie?

This new dental floss is amazing!

If you already have large assets and lots of experience, then you may not. However, most of us start out with neither. We need to either gain knowledge and experience on our own using our brains, books, and blogs – or with the help of a teacher/advisor. There are good arguments for both approaches.

There is also the option of a third way. That is using an advisor intermittently for the cohesive expert planning part while managing your portfolio and executing the plan on your own. Let’s explore the anatomy of these approaches.

An advisor can provide an objective and broader view of your finances.

While you may be fixated on your debt, or your retirement, or insurance protection, or saving towards some specific stuff or experiences — a good advisor will help you look at and balance all of your needs in all of these areas. A good professional financial advisor should have a broad and deep knowledge of personal finance. There may be areas, aspects, or options that you had not considered because you didn’t even know they existed.

I don’t fully understand how this product works, but I am pretty sure I don’t need it!

On the other hand, you can also learn about each of these aspects of financial health via numerous books and the internet. No one knows the balance and prioritization of your needs as well as you do.

Also, while the number and variation of financial tools available are vast and can be overwhelming, you don’t need them all. A solid financial plan can be built around a few simple tools and I have always been leery of using tools that I don’t actually understand well myself.

Having a layer between you and making snap investment decisions can help stop you from making impulsive mistakes.

Our brains are wired to make us failures as investors. Fear is one of the strongest drives and is so deeply seated in our make-up that it is hard to overcome. While this probably served us well when we needed to flee from saber-tooth tigers, it sabotages us as investors. People tend to sell prematurely due to fear of losing the profit they have made to date (loss aversion). Conversely, they also put off buying when things are a bargain – usually because that coincides with a fear-driven sell-off. Having to call someone to make purchases or sell from your portfolio can be a good safety check.

Of course, another approach would be to consistently buy and hold a balanced portfolio. Rebalancing once or twice a year. That is quite simple and does not require a financial advisor. This, of course, is nowhere near as exhilarating and titillating as going with the lingerie. But let’s face it. I am forty-ish and married. At this point, there is really something to be said for simple good consistent returns.

The key to this approach is to stick with it and not sabotage yourself by trying to be an active investor. That is easier said than done for many professionals and business people because it is in our nature to think, analyze, and try to be smarter than the average person. Know yourself.

A financial advisor or portfolio manager could actively manage your portfolio to get greater returns.

This is part of what makes financial advisors sexy like lingerie. They may even come with glossy pamphlets or web pages with lacey frills to accentuate their desirable traits and curvy graphs that draw the eye away from their fine print. Like lingerie, when you peel off the layers, what you find beneath may be better or worse than you anticipated. Let’s peel and have a look at the Full Monty.


Can you pick the advisor or portfolio manager who can consistently beat the markets every year?

I can’t. The stock markets are a zero sum game and the biggest influences are still large funds rather than individual investors. For everyone who beats the market by 3%, another has to lose by 3%. It is like betting on horses. The best guess you have on any manager is their past performance and it is true that past performance does not predict future performance. Very few are able to consistently beat the market for even a few years.

To actually put you ahead, your manager has to not only beat the market, but they have to beat it by more than the cost of their fees.

An active manager costs money. For an individual advisor, this may be around 1% of your assets under management (AUM) per year. If you have a larger portfolio, you should be arguing for a lower % of AUM. The numbers are bigger, but it does not take much more time or money to manage one million dollars compared to two.

Most mutual funds have to pay for not only their money managers, but also their salespersons, business infrastructure, and business taxes which get rolled into the management expense ratios (MER). Most mutual funds have an MER between 1.5-2.5%. For contrast, a passively managed index-tracking ETF, usually has an MER of 0.05-0.5%. The evidence shows that a passive index strategy beats active managers in head to head combat.

An investment manager needs to consistently beat the market by about 1-2% per year to be financially worth it from an investment standpoint.

That is incredibly hard to do.  Most actively managed portfolios do not beat the market when fees are accounted for. This is especially true during bull market years when any idiot (like me even) can look like a genius just by spending time in the market. Over the past 90 years, the stock market has spent much more time in bull mode than bear mode. In that setting, the most time in the market with the least drag from fees and taxes generated by turning over your holdings does the best.

Be leery of getting seduced in by a sexy financial advisor.

Almost all advisors dress well. It is part of being a professional and you don’t want a bum managing your money. However, beware if it is excessive. Some wear expensive clothes and drive expensive cars to exude financial success from their pores like pheromones to draw clients. This will also be coupled with some stroking of your ego about your own success and innuendo about your future financial triumphs.

It is hard to resist – these folks are pros and part of being a successful advisor is indeed being able to woo and attract clients. But also remember this. Rather than reflecting financial success, an overly expensive suit or car may reflect a lack of fiscal discipline or an overemphasis on appearances. They get the money to buy those things from their fees mostly. They still get paid whether they grow your money or lose it.

I would want an advisor with depth, their priorities in the right place, and who will honestly tell me if my lingerie makes me look fat.

The real value of a financial advisor lies more in their general financial planning guidance and portfolio design while complementing an accountant’s tax planning expertise rather than active investment management.

There is huge variability in skill and focus in these regards in the financial advisor industry. By virtue of the fact that you made it through a 1500 word post about financial planning, you have demonstrated an interest in managing your financial life. However, I also recognize from talking extensively with my physician colleagues that most will use an advisor.  White Coat Investor also acknowledges that while many docs can “do it” without the frills of an advisor, some just shouldn’t.

My main mission with Loonie Doctor is to help you make better informed financial decisions. Part of that when dealing with financial advisors is being an informed client. That will help you pick an advisor that is going to give you good advice and value for your money.

In my next post, let’s go shopping for a financial advisor. I assure you it will be way less embarrassing than shopping for lingerie.

Note: This was originally the first part of a mammoth-sized post in Oct, 2017. The length did not pass Mrs. Loonie Doctor’s attention-to-financial-topics-span. Even with the sexual innuendo! So, I re-wrote, updated, and split it up in May, 2018.


  1. Vanguard’s asset allocation ETFs are a one stop shop. Just pick your asset mix (3 options and your done)
    Management fee 0.22 for a global balanced equity and fixed income portfolio.
    I consider myself fairly knowledgeable but it’s the emotional part that usually gets me. Selling winning stocks too early and Holding on to losers too long.

    1. Thanks Jeff. I had the same emotional control issues when I started too. We are strongly hardwired for sure. I learned to be more hands off and stick with my allocations, but it was an expensive lesson. There are lots of good ETF portfolio options out there. A simple one stop portfolio like you suggest could be helpful to get people started rather than being overwhelmed and doing nothing.

  2. Hi there,

    Do you have any posts with example portfolios for passive investing that span both a professionals personal and corporate accounts?
    I fully believe in passive index investing and I have been using the TD index e-series in my personal account (which is TFSA right now) but I have recently started to accumulate surplus cash in my corporation (after coming back from maternity leave) and I understand that it is not that tax efficient to maintain my same investment funds in my corporate account as it is in my TFSA. Any guidance would be appreciated. I have read much of Justin Bender’s stuff and Dan Bortolotti as well, but their example portfolios don’t deal with corporate investing. Any advice or direction would be appreciated.


    1. Hey Steph. Absolutely! I have spent a fair bit of time on this to make it super easy actually.

      My Robocorp portfolio building tools do this and automate the math in the background. There is a 3-4 fund version and a 5-6 fund version. You can basically enter in how much money you have in each account type, select your asset allocation, and it builds a model portfolio. The only change I am considering is subbing in HBB.TO for ZDB.TO as the bond ETF for tax-exposed accounts. Of course, I am not giving ETF-specific advice since I am not a securities professional. Here is a post where I explain most of the ETFs used a bit. These are just tools for you to get an idea and DIY.

      There is also a beta version of my rebalancer where you can enter in your current holdings (just substitute what you use for what I have as the example ETFs), asset allocation etc. and it puts out a worksheet that you can use to manually add/take away from positions to rebalance. It tries to do so in a cost-effective minimizing capital gains kind of way. It also incorporates other asset classes like REITs or preferred shares if that is part of your plan (more complicated than most people use). It also works for 2 TFSAs, 3 RRSPs, 2 Corp accounts, and 2 personal accounts.

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