What’s the first thing people think about if they need a will? Which lawyer should I call? If they get sick or think they need a physical exam, do they ask their brother-in-law? No, not unless the brother-in-law is a doctor. Yet so many people handle their own investments, rather than use an advisor. Why? Did they or a family member have a bad experience? Are there cost concerns? It appears that neither one is the answer for most do-it-yourselfers, according to a survey for the Deloitte Center for Financial Services.
Many have a “higher comfort level in handling retirement planning on their own” and a “belief that they don’t need professional advice.”
The survey of over 4,000 households found that nearly two-thirds don’t ask the advice of a professional investment advisor for their retirement needs. The younger you are the more apt you are to do it yourself. According to the survey, 75% of those who were 15 years or more from retirement did not use an advisor.
Of those not getting professional advice only 13% mentioned they had a negative experience with an advisor and only 12% mentioned cost. The two leading reasons for self-managing personal finances were the comfort level people had doing it themselves and the belief that they didn’t need professional investment advice. There are other factors at work. Too many people have not bothered to put any money away for a “rainy day,” much less retirement. Those who have begun saving for retirement often mistakenly believe they have too little money to interest a professional advisor. I have had people come to me and ask if they qualify to be a client of mine since they “only have $100,000 to invest.” While some advisors have minimums of as much as $1 million, most advisors are willing to work with people who don’t have that much.
What these do-it-yourselfers don’t realize is that the old model of providing financial advice and investment management is broken. Twenty years ago people looking for advice opened an account with one of the huge brokerage firms. These firms made a lot of their money by encouraging their brokers to trade stocks, bonds and mutual funds in their clients’ accounts and to charge commissions on each transaction. There was rarely much in the way of true “planning” offered; often it was nothing more than a stock idea by a firm’s analyst that got pushed to the broker’s customers. Today, a whole new generation of advisors exists who have broken the old mold. These are the Registered Investment Advisors (RIAs). They are quite often experienced advisors and financial planners who have left the major firms and established their own advisory firms. Their objective is to help their clients succeed in achieving their life goals. They offer a range of services all the way from advice and guidance on investments held at other places, like 401(k) accounts, to complete active portfolio management. For people who want to remain in control of their own finances, these advisors can act as facilitators, enabling them by providing the tools and experience that the typical individual investor does not have. There is value in having expert advice, whether it’s dealing with the complexity of law, medicine or family finances.
An advisor should bring more than expertise and experience; they should provide peace of mind. According to the Deloitte survey, the people who get professional advice on managing their money were almost two times as likely to feel very secure about their retirement versus those who forego professional advice.
The chances are that if you work with an advisor, you will be much more likely to have a “flight plan” to guide you to a safe landing for a financially secure retirement.