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There are a number of conventional reasons why a segment of people have always resisted the urge
to hire an investment advisor. Nevertheless, there comes a time in virtually everyone’s life when circumstances change at which time finding a trusted advisor may well become a priority and a rewarding proposition that leads to less stress, superior execution, or simply a safety net for your family.
The comments above and below are excerpts from an article by David Fabian (fmdcapital.com) which has been edited ([ ]) and abridged (…) to provide a faster and easier read.
Some of the reasons might include:
- I enjoy managing my own portfolio.
- I can do better than most advisors out there.
- No one cares about my money as much as I do.
- I have had awful experiences with investment advisors in the past.
- I don’t want anyone to know how much money I have or where it is invested.
Each of these arguments is completely valid in the eyes of the beholder. There are many independent investors who have done extremely well on their own by saving and directing their assets appropriately. They don’t necessarily need to pay someone to do that for them as long as they still enjoy the process and have meaningful results to back it up. Nevertheless, there comes a time in virtually everyone’s life when circumstances change.
- It may be due to the natural aging process or
- certain risks that take new precedent.
- It may be that you are simply tired of the process and want to seek out new activities.
Whatever the case may be, finding a trusted advisor will eventually become a priority if you worry about any of the following situations.
1. Cognitive Decline
The passage of time bestows upon us experience and wisdom as investors that helps reinforce our philosophies or help avoid mistakes. Nevertheless, as we age well into retirement years, there can also be a turning point where you lose your edge.
Forgetfulness of certain methods or facts that were once easy to recall can become a serious issue for those who decline help with their finances. If you find it becoming more difficult to grasp what’s happening in your investment accounts or are constantly looking up things that used to be on the tip of your tongue, it may be time to seek out additional assistance.
An investment advisor can:
- ensure you remember to complete your required minimum distributions,
- oversee the asset allocation, security selection, and overall direction of your portfolio,
- explain new investment ideas or
- challenge misconceived notions that may be holding back your returns.
You don’t have to necessarily give up full control, but having a second pair of eyes and ears at hand can be a tremendous benefit in the long run.
2. Backup and Seamless Transition
Every now and then I meet with investors who are proud of their independence and have done tremendously well over the course of their lifetime. They have stuck with an investment strategy that has stood the test of time and were consummately rewarded for their diligence, yet, when asked a simple question such as – who would look after your accounts if something happened to you? The answer is usually complete and utter silence.
It’s rare to find spouses who are both intimately involved in the strategy and direction of their investment portfolio. Furthermore, if something happened to both of you, who would be in place to ensure the seamless transition to the next generation?
One option to consider is hiring an investment advisor as a backup point of contact for all family investment matters. Again, you don’t have to turn over every account or relinquish full control but having someone else who:
- is aware of your account structures and beneficiary information, and
- can step in to ensure continuity of cash flow
is a big step towards peace of mind.
If something were to happen to you, you don’t want your kids or spouse frantically rifling through your files trying to piece together where everything is. Furthermore, significant damage can be done by not properly re-titling accounts or creating unintended taxable events if the correct procedures aren’t followed.
Proper preparedness starts with education of all parties about how your affairs should be handled and working with an advisor is a solid safety net for any unforeseen events.
3. Stress Reduction
Many people pride themselves on self-sufficiency and at one time may have relished the responsibility of managing their own portfolio. Nevertheless, the continual stress of handling a growing nest egg can take its toll psychologically and potentially turn into an overwhelming burden.
Those who find themselves worrying over every minor investment decision or seeing individual dollars won and lost on a daily basis may be adding unneeded stress to their lives. This may manifest in an inability to sleep well at night, arguments with loved ones, or other deteriorating health issues.
An investment advisor:
- should be driven to see your accounts succeed both through professional pride and in their compensation structure and
- has a stronger sense of emotional detachment from the ever day gyrations of the portfolio [which] may lead to better decision making over the long-term rather than getting caught up in short-term cycles that lead to disappointing results. Being able to step back and see the big picture is helpful in this regard.
The Bottom Line
Not everyone is cut out to work with an investment advisor. Those who choose to forego this path must ensure they have the time, tools, and discipline to successfully manage their own portfolio. Nevertheless, a regular evaluation of your personal risks and objectives may eventually uncover the incrementally attractive option of outsourcing your wealth management.
Seeking out a trusted investment manager can be a rewarding proposition that leads to less stress, superior execution, or simply a safety net for your family.