Indeed, price and performance have served as the value propositions for investors for decades. But now you need to throw them away—and if they are your sole reasons for hiring your advisor, throw him or her away, too.
That's because you don't need an advisor for either reason. Thanks to innovative technologies, decades of economic research and a society that is far more complex than those experienced by prior generations, the old value propositions offered by financial advisors simply no longer have any value.
Thirty years ago, commissions for stock trades were fixed by the government, and virtually all mutual funds charged you an 8.5 percent sales load to buy. Today you can buy stocks for less than 10 bucks a trade, and most mutual funds now cost nothing to buy or sell. And carrying costs? While the average mutual fund still costs 1.3 percent per year, according to Morningstar, index funds and exchange-traded funds cost 0.2 percent per year—literally pennies.
If you need help choosing investments or building a portfolio, dozens of online sites will do it for you. Like the best advisors, all these sites rely on the latest academic research to create a highly-diversified portfolio. The result is that investors can expect to receive returns comparable to those provided by the global financial marketplace—and they typically charge just 0.25 percent per year. (At least one site does it for free.)
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