Do you really need a financial adviser? The answer is more complicated than you might think

Most of us like to believe we can manage our own money.

After all, we now live in an era where financial information is everywhere. You can read investment blogs online, learn about bonds and equities on YouTube, compare insurance plans online and even use robo-advisers to build a diversified portfolio in minutes. 

Some people are also turning to AI for financial advice.

So it is a fair question: Do people still need financial advisers?

The answer is not a simple yes or no. More importantly, many people do not actually understand what "financial advice" means in the first place. 

In Singapore, the national financial education programme MoneySense defines financial advice as being given when someone assesses your financial situation and recommends investment or insurance products.

Under the law, these people who give out such advice – known as financial advisers – must be representatives appointed by licensed financial institutions such as banks, insurers or brokerages.

But in everyday conversation, the term "financial adviser" has become a catch-all label that mixes together very different roles. 

Some advisers mainly sell insurance. Some focus on investment products. Some specialise in retirement planning. Some are tied to specific institutions, while others can recommend products from across multiple providers. 

Therein lies the problem. 

Many people do not actually know whether they are receiving financial advice, product recommendations, or a sales pitch dressed up as financial planning – which is why some wonder if they can do without a financial adviser.

WHEN YOU PROBABLY DO NOT NEED A FINANCIAL ADVISER 

Not everyone needs a financial adviser for every financial decision made.

If your finances are relatively straightforward and you are willing to learn, many parts of financial planning can be done by yourself.

For example, if you are young, single, have no dependants and simply want to start long-term investing, you may not need to seek out a licensed adviser or purchase a complicated investment product with high management fees. 

Instead, a globally diversified, low-cost portfolio may already be sufficient.

Similarly, basic insurance literacy is also easily accessible. You can learn the difference between term insurance, whole life insurance, critical illness coverage, and hospitalisation plans on your own. 

Comparison portals such as compareFIRST – launched in 2017 as a joint effort by the MAS, Life Insurance Association Singapore, Consumers Association of Singapore, and MoneySense – have also made it easier to evaluate products across different insurers. 

For simpler financial decisions, the cost of making mistakes is usually manageable. 

The danger, however, is that many people overestimate their own understanding.

They think they know what they have bought, when they actually do not. 

They think they are "investing", but are actually buying an expensive product  with high fees, long lock-ins and poor liquidity.

Insurance blind spots can be even more painful. Some policyholders discover the gaps in their coverage only when a medical crisis happens, even after paying premiums regularly for years.

This is where a good adviser can be valuable. Not because they know everything, but because a good adviser can spot risks or blind spots.

WHY SOME DECISIONS ARE HARD TO DIY 

A good financial adviser is not just someone who sells you a product.

At their best, they should guide you in organising your financial life more holistically, which includes understanding your income, expenses, existing policies, investment portfolio and long-term goals, among others. 

This is important because money decisions are rarely isolated. 

Buying insurance or investment-linked policies is a long-term commitment and should be weighed against your financial commitments and liabilities. 

For example, whether you need more insurance depends on dependants, debt, your spouse's employment, CPF savings, and your family's ability to sustain their lifestyle if something happens to you. 

These are nuances that many do-it-yourself investors may not fully think through.

At the same time, part of the public discomfort around financial advisers may also arise from a mismatch in expectations.

From my observations, many consumers hope for someone who can guide them through the bigger picture of money and life decisions. In reality, much of the industry is still built around recommending financial products.

This distinction is important because I've noticed that the public’s expectations and perceptions of what constitutes “financial advice” are vastly different from how MAS actually defines and regulates it.

WHERE ADVICE CAN ACTUALLY HELP 

I think financial advice becomes more valuable as your life's decisions grow more complex.

Insurance, for instance, is not just about buying the cheapest plan. It is about understanding which risks you want protection against, and how much coverage your situation actually requires.

A single person with no dependants may not need the same death coverage as a parent with two young children and a mortgage. A self-employed person may need to think more carefully about disability income because there is no employer safety net.

These are not straightforward decisions, especially when policy documents can be technical and difficult to compare. 

Some insurance policies are available solely through licensed advisers, which you might not discover if you only search online. In that sense, a good adviser may help you catch these blind spots and think them through. 

Investments, however, are where things become trickier.

On one hand, many people do benefit from guidance. A good adviser can help them build discipline, as well as avoid panic selling during downturns, chasing unrealistic returns, and making emotional decisions. 

On the other hand, investment products can also create conflicts of interest.

Some products are complex, expensive or structured in ways that consumers do not fully understand.

Which is why consumers should not only evaluate the product itself but also understand how their adviser is compensated and do their own research to determine whether the recommendations are truly aligned with their interests.

YOUR MONEY, YOUR RESPONSIBILITY

So, do we really need a financial adviser? 

Not always, but we do need sound financial advice throughout the different stages in our lives.

Sometimes, advice comes from your own research, books, courses, government resources, or even from spouses or parents with life experience. However, a third party, like a financial adviser, can assess our situation objectively and point out what we might miss.

For simple investing, many people can do it themselves. When it comes to basic budgeting, emergency funds and long-term investing, the information and tools are widely available. 

But for complex insurance planning, family protection, estate matters, retirement income or major financial commitments, good advice can be worth far more than what it costs.

The key is not to blindly trust advisers, but also not to blindly distrust them.

The better approach is to become an informed client. To know enough to ask good questions. Understand enough to spot red flags. Stay humble enough to seek help when the decision is important. 

Because whether we do it ourselves or work with an adviser, the responsibility of our financial decisions ultimately still belongs to us. 

And the financial outcomes we achieve over the next few decades will largely depend on the decisions we make today.