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Financial Advisor Performance

  • How much returns does your financial advisor get you?
  • Are your investments earning more now that you have a financial advisor?
  • Are their fees obliterating the profits from your investments?


My wealthiest friends have financial advisors. And then I have friends who have been debating getting an advisor for years now. I can certainly understand the hesitation due to the cost involved and some of the horror stories that even I share with others.

In this post I want to explore the question of whether your financial advisor should be paid based on their performance. After all, that’s the path that medicine took a few years ago, for better or worse.

We need to explore the purpose of a financial advisor and come up with an incentive model that’s beneficial to both the expert and the client.

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Financial Advisor Performance

As a doctor my goal isn’t to get a patient’s lab value within the recommended range. That’s not what a doctor does, nor does it change the health outcome of the patient.

» What’s the purpose of a financial advisor?
» To get us the highest returns possible?
» To make us incredibly wealthy?
» To have our investments perform well even when the market tanks?

Financial advisors are… advisors on financial matters. A CFP is a certified financial planner, not an investor.

Wanting your financial advisor to also be your investor is like wanting your primary care doctor to also be your surgeon – possible but likely fatal.

A financial advisor should:

  • advise you on your financial habits
  • help you prevent major financial mistakes
  • protect you against major financial loss
  • help you grow your net worth over the long term

A financial advisor shouldn’t:

  • sell you financial products
  • expose you to excess risk for higher returns
  • manage your money without ongoing input/feedback


I measure my financial advisor’s performance first by whether this is a competent and personable person. Someone I can trust and someone who seems to have their own financial shit together.

Based on how much I’ve listened to them, I expect that my investments keep up with conservative market trends. I’m not trying to beat the S&P500 because my risk profile isn’t the same as that index’s.


Looking For An Investor

My patients come to me with chronic back pains due to inactivity, obesity due to unhealthy diets, fatigue due to excess stress, insomnia due to poor sleep hygiene and they are looking for that one magic pill.

They aren’t looking for a doctor but a miracle. Most of my attempts of addressing the underlying problem is stifled by the allure of that one cure-all medication or diagnosing that one illness which will explain everything.

Don’t go to a financial advisor to get 20% returns on your investment.

Understand that your FA is there to advise you mostly (90%) on your financial habits and offer unique insight (10%) in order to trend your net worth in the right direction.

Case Example of an Investor

A close friend who earns nearly $500k/year as a physician has invested with his investor for nearly a decade. He’s always touted the incredible returns over the years. I finally got him to sit down with me and do the math to determine the overall returns.

Long story short, his investment doubled early when his day-trading investor took advantage of the 2008 crash. Then it lost a little every year and has been stagnant ever since.

I am not talking shit about his investor, it’s possible that his money might double every year from today onward. My point is that this is the nature of having your money with an investor. It wasn’t even worth factoring in the fees since my friend’s money really hadn’t moved enough to affect the math.

He ended up pulling his money from this investor and has since invested in more predictable investments.


Those Who Need A Financial Advisor

In fact, the people who need financial advisors the most are the ones who are earning less than the median household wages in the US. However, these households are either too strapped to afford an advisor or will have their priorities in spending on cars/entertainment.

The other group that needs a financial advisor is the healthcare professional earning  <$500k/year. If you’re an orthopedist, ENT, anesthesiologist, or IR then you are going to earn enough to make up for your decade of lost investing. You’ll also make up for the many financial mistakes you’ll make along the way.

Earning $100k, $200k, or even $300k doesn’t go very far these days. With even more volatile markets, hidden inflation, and with much less time invested in the markets, healthcare professional have quite a few strikes against them. Their leg up on the competition comes from being able to afford expert advice.

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