Should You DIY Your Finances Or Trust a Financial Planner?
Ding ding
It was a Whatsapp.
“Hey Amit, how do we know when to DIY our investments and when to rely instead on our banker or financial planner?”
“Ah,” I nodded sagely, putting down my paper and settling back on my overstuffed leather chair as I gently tapped the bowl of my pipe against the side table.
“Well, it depends-” I started to type.
“Heck, I’m late! Write it up on your blog, won’t you? I’ll take a look. Rushing to a meeting. Cheers!”
Ok, then. Here it is.
⚠️ You absolutely need to be in control of your finances
There are no two ways about it. Regardless of whether you use a financial planner, take advice from your relationship manager, invest with a fund manager or otherwise outsource your money management, you need be in control.
This means you must understand what they are doing, know how it builds towards your financial goals and, most important, read the fine print and approve of their actions. Anything less means you are trusting your financial future to someone whose goals are not aligned with yours, even if at first glance they may seem to be.
Why?
Bankers and financial planners are salaried individuals, which makes them salespeople, first and foremost. They work on commissions, which means they don’t make money by giving you good advice, unfortunately. They make it by selling you something that’s profitable to their institution. And guess where the profit comes from?
That’s why your planner needs to be only a partner, not the boss of your future.
Your advisor should be a partner in your future, not the boss of it.
I know this first hand, having been on the receiving end of bad advice and escaped major losses only through belated realisation and last-minute fire-fighting.
That said, there are four reasons to work with a financial advisor
If you are clear about your goals, there are very good reasons to work with a financial planner. After all, that’s why people like me put disclaimers at the end of our articles asking you to talk to one!
But all these reasons relate to improving your own decisions, rather than transferring responsibility for them.
Lack of time
We’re all busy. Or tired. And detailed financial research isn’t always the most fun thing to do between work and relaxation. That’s when the expertise and knowledge of a good financial planner comes into play.
Money management is a hobby for you, but it’s a full time job for your financial advisor. They may have the time and opportunity to delve deeper into topics that you can. So, check whether they can help with your research.
Market insights
More than time, your banker/ advisor has access to an ocean of research and market insights — way more than you will have, ever.
A professional has access to dozens of publications, restricted-circulation analyst reports, reams of data on Bloomberg terminals and instant alerts to market-moving news.
…versus your Yahoo Finance bookmark and Motley Fool newsletter.
Access to investments
As if time and knowledge weren’t enough, professionals representing specific banks or financial services firms can sometimes get you access to financial instruments that you cannot just buy on the open market.
And, if you are investing large sums — maybe not today, but if you are really diligent about your financial journey, you will in a few years — they can even custom-design solutions to address your specific problems and requirements. That’s something you can’t just DIY yourself.
A second opinion
Finally, as you take charge of your investments, it doesn’t hurt to get a second pair of eyes on them. As professionals, they may be able to spot loopholes or issues that you may not know about. For example, they might be able to save you $$$ by telling you that USO invests in futures and not directly in the commodity, like you thought 🙄
But, please don’t take them for a ride either
I know I’ve been a bit down on bankers and planners in this article. And that’s because I’ve been burned in the past.
But you know what? It was mostly my fault. I didn’t read the fine print, I abdicated my responsibility for my own future and I paid for it.
Like said earlier, bankers are employees. Like you, they are also looking out for their own families, their own financial security. It’s not their fault that the system is set up as a zero-sum game, where they have to pick your pocket to make money.
(A much better way to get quality advice would have been for consumers to pay fees for neutral, unbiased financial advice from experts unaffiliated with any sales-driven institution, but who really pays for financial advice?)
Instead, partner with them. Take their help. But set upfront expectations about what they may or may not expect. Then try to find a way to give them a piece of the action. In the diverse set of investments you are making, perhaps you can give a piece to your advisor, so they get something in return for spending time with you.
A win for both. Now isn’t that a great outcome?
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Note: I am not a licensed financial advisor. Please use any advice, tips, tools and other material as guidelines only and seek help from a certified financial planner before taking any action
