Familiar with do-it-yourself investing? Many people think they know best when it comes to managing their own investments. And in some cases, they do, especially when they’re financially literate and market savvy. However, that doesn’t mean one should set sail on the financial seas alone.
Yes, investing is simple, but it’s not easy. Hiring an objective financial planner to provide advice, recommendations, and strategies can make a big difference. For instance, you might be able to build a portfolio of mutual funds without hiring a financial advisor. But properly diversifying your asset allocation, updating your portfolio, and developing a deep understanding of how your holdings fit into your overall investment strategy to reach your goals is another feat entirely.
So what might your investment strategy be missing by doing it all yourself?
Financial Planning Is Simple, But Not Easy
Let’s face it. Do-it-yourself investing can be risky. Not only does it require immense discipline to regularly invest and choose sound investments, but it also requires courage to pivot or stay in the game, especially when the market heads south. Yet some do-it-yourself investors think that enlisting the help of a financial advisor is:
- Too expensive
- Only for the financially ignorant
- Akin to giving up control over their finances
But the truth is, a financial advisor can view your investment strategy more objectively than you can. No matter how stoic we may be, we’re always going to be at least somewhat emotional about almost any financial decision we make. That’s why even expert investment managers hire their own financial advisors to help them create a solid plan for the future.
At Caviness Wealth Management, we think your financial future is too important to entrust it only to yourself, no matter how financially literate you may be. As a small firm, we take a hands-on approach by customizing a sound investment strategy and a formal financial plan to match your unique needs and goals for your life.
To kick things off in the right direction, let’s reframe our understanding of a few of the common myths we mentioned above, starting with the true cost of hiring an advisor.
Myth #1: Hiring a Financial Advisor Is Too Expensive
According to the latest research, Americans’ most trusted source of financial advice is from their financial advisor. What’s more, according to Northwestern Mutual’s 2021 Planning & Progress Study, four in ten Americans work with a financial advisor.
So, what do investors working with a financial advisor know that others don’t? For starters, they know that the fees for financial advising services are often lower than most people think. And they also know that the planning and investing insights they gain from their advisor often surpass the cost of the advisor’s services.
For example, many advisors charge fees based on a percentage of assets under management (AUM), usually within a range of 1% to 2% of the investment account’s value (adjusted up or down depending on the size of the portfolio). For a $500,000 portfolio at a 1% AUM fee, that’s as little as $5,000 per year. If the advisor charges a fixed fee, the average cost ranges from $1,000-$3,000 per year or $100–$400 per hour.
These fees should be offset by the financial gains you see or save from working with the advisor. Your advisor should add value to your investment strategy and financial decisions. Although no advisor can ever guarantee returns, research has found that working with a financial advisor nets investors an average of 3% in additional annual returns.
Myth #2: Only Financially Ignorant People Need a Financial Advisor
It’s not just the financially ignorant who need financial advisors. In fact, quite the opposite. If you’re one of the 22% of Americans that view themselves as a “highly-disciplined planner,” you have exact financial goals and you’ve created specific plans to meet them. But that doesn’t mean you should forgo a relationship with an advisor, nor does it mean that you have to give up control of your plan.
Even if you’re confident about the decisions you make with your money, you risk missing opportunities due to subjective, emotional feelings about your finances. Additionally, you don’t know what you don’t know, and without someone giving you good counsel, you run the risk of making a life-altering mistake that could jeopardize your financial security.
Myth #3: You Lose Control Over Your Finances
Finally, some people fear they’ll lose control over their finances when they turn to an advisor for financial advice and investment management. However, you can rest assured that ultimately, you’re not giving up the role of managing your financial decisions once you hire a financial advisor. When it comes to investing, your relationship with your financial advisor is just that—a relationship. And a successful relationship requires a healthy amount of giving and taking.
After all, regardless of whether you’re a highly disciplined, disciplined, or informal planner, you know best what keeps you up at night. You also know exactly where you want your wealth to take you. (And if you haven’t identified specifics yet, we can help you take a closer look). At the end of the day, you are the boss of your money and will remain so, even after you hire a partner to offer their expert knowledge and full support.
We’re here to eliminate frustration, and what’s more, make approaching your finances strategic and intentional. At Caviness Wealth Management, we specialize in forging lifelong relationships with our clients. But a lifelong relationship can only happen if you allow and desire it to be so and if you choose the right advisor for you and your situation.
How to Find a Financial Advisor Who Can Make Investing Easier
Make the effort to “shop” for an advisor the same way you would when buying a big-ticket item, such as a home purchase. And don’t wait to start shopping for a financial advisor when you’re in a pinch, as that can sometimes interfere with your ability to freely ask questions or interview several potential advisors to learn which one will ultimately be the best fit.
You’ll want to keep in mind the cost and affordability of the management services relative to the quality of the services offered. Quality is difficult to measure, but you should consider the advisor’s credentials, achievements, and the perceived integrity of the advisor’s work.
Also, take an assessment of your own needs and explain them clearly to potential advisors. This will help both you and the financial advisor determine whether their services will be compatible with your needs, especially if you have more wealth or a complex financial situation.
Once you’ve found an advisor whose style and investment philosophy feel suitable, orient yourself to understanding the relationship you are paying for, and aim to develop the relationship that you want and need.
While wealth management has an ‘end-game’ in that most people hope to retire comfortably and achieve long-term financial security, your advisor should empower you to make smart decisions in all phases and aspects of your life—decisions that involve an investment strategy that’s aligned with both your short- and long-term financial goals.
Partner with Caviness Wealth Management for Comprehensive Financial Planning and Investment Management
Investing is simple, but not easy. And shopping for a financial advisor is also not easy, even if the choice to hire one is simple. Hiring the right advisor takes time and effort: you shouldn’t spend more time choosing a new car than you do finding a financial advisor, especially when you know their advice can add to substantial account growth over an extended time.
When you need help making financial decisions along the way, we’re here for you. At Caviness Wealth Management, we offer comprehensive wealth management services customized to your situation. Together, we can chart a specific course for your investments with the goal of helping you feel more confident about where you’re headed. To see if we can help you, click here to schedule a conversation today.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
