It is very tempting to manage one’s own investments and many dive head first into it. There are two aspects that drive people to try this: being in control and save money. Although most of the people that claim that the latter is the reason, the fact is they want to be in control. Because of that there are zillions of companies and individuals advertising and teaching the “hidden secrets of trading (or investing) success”. However, one aspect that not a single one touches is the costs of trading for a living. So, let’s get to it and do some number crushing. In the first article we discussed the long term investor. In the second article we moved to the other end of the spectrum and evaluated the day trader. In the third article, we crunched the numbers for the very popular swing trader. In this last article we will wrap it all with some considerations and suggestions.
Wrapping up
Well, the point is – is it worth it? Should I manage my investments?
I will bring this up from a different point of view. Our investments are not about money.
“Ugh? What you mean?” You might say. If you stop and think for a while, you will see that this is true. Many times we forget why we do what we do. Yes, performance is important. Yes, approaching investing like a business endeavour is important. But it is not the end in itself. Personally I don’t know anyone that invests just to make money. I don’t know anyone like the Uncle Scrooge character from Disney.
There is always a goal, an objective. Something that we want or need. Might be comfortable retirement or a bigger house or education for our children. Maybe helping our parents or a charity. Instead of calling these “objectives” I will call them “purpose” from now on.
What is your purpose for investing? Keep your eye on that goal and hire a specialist. Like hiring any professional, you need to approach that selection the same way. Ask for references, do your research, interview. Hire for fit It is important. This professional will help you achieve your investment purpose.
In investing, like anything else in life, we need focus to be able to reach our purpose. There are things that are important, but we cannot control all of them. So, we should always focus on what we can control. Let me draw this for you:
Looks simple, but the fact is, most of us cannot do this alone. That’s why we like to gather together with friends and family to discuss life and its intricacies. That’s why there is a multimillion dollar industry in self-help books. For many it is also important to engage the help of a professional, like a counsellor.
Going back to your finances, let me ask where you have been looking for advice? There are zillions of sources. If we Google “investment advice” as I just did, in the first page we get four ads, a quote from Investopedia (which is also paid content and advertisement), few other results from Investopedia, several Warren Buffet mentions (from places other than his great Letters to Shareholders) and some busy blogs that also live from advertisement. In my opinion, pure noise. It is like looking at the self-help shelves in the library trying to find some sort of support for a decision that will have long term impact in your life.
Research found that Financial Advisors have a high impact in an investor success. For example, a PwC study about the Canadian investment industry found that the positive impact of an advisor is huge, as the figure below, from the PwC study shows:
Interesting enough, improved overall, long-time performance is achieved not based only in investment selection, but mostly in coaching and support. Things like helping with family financial literacy, being a support in areas other than investments and being a counsellor are where an advisor can help.
- Budgeting and financial planning: assists clients with budgeting and planning, focusing on cash flows, retirement, estate, house purchase, children education, debt repayment, debt planning, charitable giving, intergenerational transfer, etc.
- Insurance and risk management: creating a risk management plan for the client and his family, helping to plan for the main risks all of us have, i.e, living too long, dying too soon or getting sick.
- Investment strategy and portfolio risk management: advice about asset allocation, investment strategies, risk and performance balancing as it relates to performance goals, etc.
- Retirement and estate planning: advice about needs and disbursements, wealth transfer, etc
- Tax planning: structuring investments, disbursements and transfers to be tax efficient.
- Small business planning: assist owners with the financial planning for their business, including support for decisions about selling, purchasing or growing a business. Pension plans and group insurance for employees and owners. Financial Literacy training for employees, owners and their families.
- Relationships with other business providers: being a relationship conduit, connecting clients among them as well as with other business providers such as lawyers, accountants, and many others. Also, advisors can consolidate the accounts carried by several financial institutions and simplify the management for the client.
- Education and client awareness: Help clients and his families understand better the financial markets and the principles of personal finance management. Help connect the long term goals with the short term steps that impact them. Help facilitate the intergeneration conversation about finances.
This list is not exhaustive; it could go on and on. The idea is to give a glimpse of what an advisor can do. The extent of the services provided will depend heavily on the structure of the financial institution where the advisor works, his personal abilities and education as well as how close the relationship has grown.
Would you like to know more? Contact us!
Getting Started:
Contact Jose Cid at 604 229 2332 or fill the contact form below.