Managing Your Own Investments? How to Decide Whether You Need an Advisor
By Dragan Mark Filipovic, CFAFounder and Chief Investment Officer
Managing your own investments can be a reasonable choice if you understand your portfolio, maintain a suitable strategy and are comfortable carrying out the work. If you are considering an advisor, ask what additional support you would receive and whether it is worth the fee to you.
The decision becomes more important when your finances change. Retirement, an inheritance, company stock or several accounts with different purposes can create work that was not part of your original investing routine.
Knowing how to invest and wanting to remain responsible for every investment decision are different questions. Consider whether you want ongoing help carrying out the strategy as your life changes.
Consider the work beyond choosing investments
Selecting funds is one part of managing a portfolio. You also need to decide how much risk to take, recognize overlap among holdings, maintain appropriate cash, evaluate costs and adjust when your goals change. Withdrawals introduce additional decisions about which assets and accounts to use.
Consider your time, willingness and ability to manage your investments. Two people with similar account balances can need very different levels of help.
One investor may enjoy the work and follow a written strategy consistently. Another may understand the basics but no longer want to spend evenings coordinating accounts or making decisions during a difficult market.
Test whether your current process is complete
Ask yourself whether you can explain:
- Your total mix of stocks, bonds and cash across the accounts supporting your goals.
- How much money you will need over the next several years and where it will come from.
- What would prompt you to rebalance or change the strategy.
- Your investment costs and the potential tax consequences of planned sales.
- How the portfolio would be managed if you became unable or unwilling to do it.
An unanswered question does not automatically mean you need an advisor. It identifies work to complete, whether independently or with assistance.
Discuss your investment process in a Complimentary Portfolio Review
Recognize when the decision has changed
Consider a hypothetical investor who has built a portfolio through regular retirement-plan contributions. While working, the process may be manageable: contribute consistently, use a diversified allocation and review periodically.
As retirement approaches, the same investor may need to coordinate withdrawals from a traditional IRA and taxable account, keep money available for a move and assess whether employer stock creates too much concentration. The investments did not necessarily become worse. The decisions became more connected.
An advisor may be useful if you want those responsibilities managed continuously. If you only need help with one defined question, another form of professional assistance may fit better. Clarify the scope before paying for an ongoing relationship.
Compare help fairly with doing it yourself
Ask a prospective advisor what they will do, what decisions remain yours and how the fee is calculated. If you already hold suitable low-cost investments, ask what they would retain and why they would change anything.
Do not assume an advisor will outperform the market or that projected tax savings will cover the fee. The value may instead lie in a coherent investment process, ongoing implementation, time saved and assistance applying your strategy as circumstances change. Those benefits should be explained specifically enough for you to decide whether they matter.
Likewise, do not dismiss self-management solely because your portfolio reaches an arbitrary dollar amount. Complexity, interest, discipline and available time all affect the decision.
Make sure someone can continue the process
If you manage the household investments, consider whether your partner or another trusted person understands the accounts and strategy. A written account inventory and an explanation of how spending is funded can be useful whether or not you hire an advisor.
Do not share your account passwords. Ask your financial institution how to give a trusted person the appropriate access to your accounts. If someone may need to make financial decisions on your behalf, consult an attorney about the legal documents required.
See whether ongoing management fits your needs
Gold Coast provides ongoing wealth management centered on building and managing your investment portfolio. You work directly with Dragan Mark Filipovic, CFA, Gold Coast’s founder and Chief Investment Officer. He personally manages your portfolio with attention to your goals, retirement needs, cash requirements, investment costs and relevant tax considerations.
In a Complimentary Portfolio Review, we can discuss your current investment process, any decisions you find difficult to coordinate and the responsibilities you would want an advisor to take on. That helps you assess whether to continue independently or delegate ongoing management. There is no requirement to transfer your accounts.
Bring recent investment statements, your main goals and the decisions you would most like help managing.
Complimentary. No obligation to transfer assets or become a client.