With so much information on market trends and investing strategies seemingly easily available, managing your own investments might seem appealing. The idea of DIYing is one worth investigating, particularly for those with a strong interest in their finances.
However, before you dive into the stock market as a DIYer, especially if you are a high-earner, take a moment to consider the potential pitfalls you may encounter along the way.
With a proven track record and 40 years of experience navigating the stock market’s complexities, we understand the nuances that can make or break investment strategies, particular as they relate to high net worth individuals with complex financial plans and goals.
In this article, we will walk you through ten reasons it may be best to entrust a financial advisor or wealth manager to guide your investment strategies, help you reach your investment goals, and make sure you’re not leaving money on the table.
1. Better Results
Studies consistently show that investors who use financial advisors typically do better on average than those who don’t. Yes, let that sink in.
Investors who partner with a financial advisor to help manage and make investment decisions experience higher annual returns—as much as 2-4% higher—and grow their savings more over the life of their investments than those who manage their investments on their own.
If you plan to use your investment accounts to support your lifestyle post-retirement, every extra dollar earned can make a difference in your ability to retire with confidence. Why this phenomenon happens boils down to a combination of the points outlined in the rest of the article. Simply put, there's a big difference working with a professional who acts as everything from an accountability partner to the voice of reason when you need it most.
2. Discipline During Market Volatility
Financial advisors bring discipline and know-how to the investment process, particularly as they navigate the highs and lows of a volatile stock market.
Advising teams like those at Plancorp act as fiduciaries for their clients, meaning every decision they make must support the best interest of the client. That means that we can be the steady hand at the tiller during market fluctuations, continuing to make smart, evidence-based trading decisions in times of volatility.
Good financial advisors don’t chase the market highs or get spooked by the lows. Rather they take time to understand their clients' investment goals and risk tolerance, and manage their investments accordingly.
3. Prudent Investment Strategies
Financial advisors work with clients to formulate a carefully crafted investment strategy to ensure its targeted return and risk levels are consistent with the investor’s objectives and risk tolerance as well as evidence-based best practices.
When going it alone, emotional decision making can cause you to go off-course, especially as a beginner. Financial advisors, particularly those that hold themselves to a fiduciary standard, don’t allow emotions to guide their strategy.
4. Consistent Rebalancing and Diversification
The market is not static and neither are your goals. As time goes on, a once-balanced asset allocation strategy needs a re-jiggering to stay aligned with your goals and risk tolerance. That said, the act of rebalancing an investment portfolio can be difficult.
When a financial advisor rebalances your portfolio, they’re aiming to protect you from unnecessary risk exposure while teeing you up the consistent reward your financial plan needs as fuel. If you think "60% stocks, 40% bonds" is all there is to diversification, you'd be surprised. With education and experience, the investment team at Plancorp works hard to consistently integrate deeper levels of diversification than many are even aware of.
The process of asset allocation is an important one to walk through with a professional to make sure your investment portfolio is working for you and your goals. Read more about how Plancorp develops your perfect asset allocation here.
5. Access to Better Funds at Lower Costs
When you partner with a financial advisor for investment strategy management, you will typically have access to institutional-only index-type mutual funds that aren’t always available in basic public exchanges.
Beyond cost efficiencies, these funds exhibit characteristics that differ from traditional index funds. They typically offer opportunity for greater diversification among asset classes that have been shown to produce greater returns over time.
6. Stronger Portfolio Design
Plancorp designs our client investment portfolios based on academic models, with more weighting given to asset classes with historically greater returns.
A good financial advising team doesn’t set up their clients’ investment portfolios using some sort of template. It’s a highly customized and thoughtful process backed by academic research, giving the client a low-cost, globally diversified portfolio. The end result will be perfectly crafted with hand-picked funds based on the client’s goals.
Curious how Plancorp designs our portfolios? Read our article to discover how we craft perfectly balanced portfolios for all of our clients.
7. Custom Reporting
A good financial advisor (and every wealth manager at Plancorp) will provide custom reporting that includes quarterly, year-to-date and since-inception performance reports for each account and for all related accounts combined.
These types of in-depth custom reports give you visibility into your investment portfolio as a whole, and can help guide your strategy moving forward when it comes to diversification, rebalancing, tax optimization and more.
8. Regular Review Meetings That Don't Cause Panic
DIY investors can certainly obtain reports on the performance of their investment accounts. In fact, they may be tempted to log in every day to check their results. But breaking them down into layman’s terms and making data-informed strategic decisions based on these reports is likely best handled by a professional, and the loss-aversion that can develop from checking your investment accounts too often can lead you to miss the biggest opportunities for growth.
Plancorp holds regular review meetings so our clients are kept up to date not just on their investment performance, but their full financial plan. A dedicated moment to chat through goals, ask questions, and get advice on living the plan is incredibly helpful based on our experience.
9. Lower Fees
A common misconception about working with a professional wealth manager is that it’s expensive. You have the fees charged by the securities themselves, on top of investment management fees charged by your advising firm.
However, Plancorp and similar wealth management firms typically have access to lower cost funds, which can save you money in the long-term, and as a fiduciary certified in our standard of client care, that is a primary pillar of our investment philosophy.
Plancorp’s fees for managing the client’s investment accounts, combined with the fees charged by the mutual funds that we use, are typically lower in total than an investor would pay if he or she simply went out and bought an average no-load fund on their own.
Not to mention DIY investors won’t be receiving the other services available through a wealth management firm like Plancorp, such as estate planning, tax optimization, and insurance planning.
To dig a bit deeper into the fees associated with wealth management, check out our recent article breaking down what's included in wealth management services and why it matters.
10. Accountability
In the intricate landscape of financial planning and investment strategy, having a dedicated professional by your side not only ensures strategic guidance, but also an unwavering commitment to your financial well-being and goals.
In an increasingly volatile and ever-evolving stock market like we are facing today, this accountability is paramount. It encourages transparency, open communication, and the assurance that your financial decisions are being consistently guided by a knowledgeable and responsible hand.
Ready to put your trust in a wealth manager who will always operate with your best interest in mind? Reach out to schedule a discovery call today and see how Plancorp can take your investment strategy to the next level.
