When Some Clients Want to Go DIY

What does an advisor do when a good client wants to manage some of their own money? There are a number of different answers depending on the advisor.

We have some clients who want us to do it all and some who want to make some of their own investment decisions. Let’s face it, picking stocks can be fun, like going to a casino and see if you can win the jackpot.

Our answer is to make sure that there is a clear distinction between accounts in which we have discretionary trading authority – in other words, we manage these accounts on our own – and accounts which we do not manage; one where the client makes the investment decisions.

We will open a “play” account in which the client can trade to his heart’s continent. We provide all of the standard portfolio and performance reports on these DYI accounts, but we have clear documentation that we are not responsible for the outcome.

We recognize that DIY investors earn substantially lower returns on average than those who work with an advisor. We recommend that the client puts only a small percentage of his assets in these accounts so that mistakes will not have a meaningful impact on his net worth.

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