We live in a world where many investors decide to go the DIY (Do It Yourself) route. Nowadays, individuals can use online brokerage accounts to buy and sell stocks very cheaply. In some cases, people can even trade without incurring any commissions (using the RobinHood app, for example).
Against this backdrop, it’s reasonable to ask why an investor should pay a financial advisor to help with wealth management. The answer, in a nutshell, is that the value of an advisor can far exceed what you pay them each year.
Investors Who Use an Advisor Tend to be Better Off
When it comes to any product or service, the ultimate test should be, “Does it work?” In this regard, the evidence shows that the use of a financial advisor is usually beneficial for investors when compared to the DIY option. One study noted that Canadians who employ an advisor “have substantially higher investible assets than non-advised households, regardless of income levels”.
Advisors Help Take the Emotion out of Investing
Investing, it’s been said, should be as exciting as watching paint dry. Along these lines, there’s nothing particularly enthralling about having a balanced, diversified portfolio designed with a long-term goal in mind. But that’s exactly why it works.
Left to their own devices, by contrast, many people seek the excitement of short-term speculation. And while we’ve all heard the axiom “Buy low and sell high”, countless investors end up doing the opposite. When a stock (or indeed the overall market) is tumbling, they sell in a panic, missing out on a future rebound. Then when things get frothy, FOMO (fear of missing out) sets in and they buy. Oftentimes, these purchases are soon underwater.
Having a financial advisor by your side can help protect you from giving into these very understandable, and yet very harmful behavioural tendencies. At a moment when all you see are falling markets, we’re there for you. If you happen to be worried about the markets, we can remind you to focus on your long-run objectives and not lose sleep over near-term volatility. And while we’re always happy to have this kind of chat, our experience is that simply having an advisor is enough comfort for most investors to know that things will work just fine.
We’re About So Much More Than Investing
Tempting as it can be, just looking at the annual fee you pay an advisor vs. the fees associated with DIY investing is essentially an apples and oranges comparison. The reason? While we do oversee investment management, that’s only one component of our service. Here at Assante, we offer comprehensive wealth management. This typically involves guidance regarding:
- Wealth enhancement (Cash flow planning and tax mitigation)
- Wealth transfers (Taking care of your heirs)
- Wealth protection (Guarding against risks that could derail your financial plan)
- Charitable giving (How to efficiently support causes you care about)
Thinking in Terms of Renovations
Truth be told, in some cases, a small amount of DIY investing isn’t necessarily a bad thing, especially if you have the necessary time and expertise to do it well. To use a household analogy, though, it’s one thing to tackle a bathroom renovation by yourself. But if you’re looking to re-do the entire basement, bringing in a contractor is probably your best bet. DIY is great in theory, but sometimes it pays to use the services of a professional!