Would you build your own home? Service your car? Or willingly home school your children? Probably not. After all, each requires specific and precise skills if you are hoping to achieve a masterful result. So ask yourself: Does it make sense to construct, monitor and adjust your investment portfolio?
It’s certainly not impossible to adopt a DIY approach to managing an investment portfolio. It puts control fully in your own hands, cuts out the fees associated with hiring an advisor and allows you to craft a unique investment strategy. But is this the best approach, especially for those that don’t have the necessary skills, nerve and experience?
Anthony Palmer, Group Commercial Director at Carrick Wealth, is frank about the fact that the number of people who can successfully manage their own wealth is few and far between. “There are some clients who can go it alone, but more frequently we are seeing examples of people making fundamental mistakes that end up costing them dearly.”
But know-how is not always the biggest hurdle when it comes to going it alone. Emotion is.
“I find that fear and greed really cloud people’s judgement and decisions are often made for the wrong reasons,” says Palmer, recalling one client who decided to self-manage his portfolio. After a while he found himself with a completely mixed bag of investments with no real long-term strategy. He was also lured into a very high-risk investment and ended up losing a substantial amount of money in a foreign currency Ponzi scheme.”
“This individual moved over to us after it became clear to him that we were not out to charge fees and add no value,” recalls Palmer. “For me this highlights the peace of mind we can give a client around the safety and security of their money as well as crafting a bespoke investment plan with the best global investment managers in the world.”
Step into any relationship with care
Conversely, Palmer is the first to admit that too many clients blindly place their trust in the system, because they don’t really understand the savings and investment landscape. “They do so to their detriment and often end up with poor financial advisors who product dump them into high fee and inappropriate solutions,” he says.
Regrettably there are lower calibre advisors out there, pretending to be investment professionals, says Palmer. He adds that it is encouraging that the market and regulations are changing to more clearly define the roles and responsibilities of financial advisory, wealth management and fiduciary experts.
That said, before picking a financial advisor – even one referred to you – it is advisable to ask about their qualifications, discuss fees and how they are remunerated, confirm if they have any tie-ups to products or providers, and have an initial ‘sounding out’ meeting in which you get a chance to gauge their personal and professional style.
The benefits of working with an advisor
It is important to note that there are a number of benefits to working with an independent financial advisor. These include, but are not limited to:
- Expert advice with respect to the best way to structure and hold an investment from an asset protection perspective, tax efficiency and succession planning point of view.
- Building a financial plan incorporating all aspects of you and your families lives, including insurance, tax planning, wills and estate planning.
- Experts across the spectrum of offshore and local investing.
- Access to new, innovative ideas and products.
- Somebody to share ideas with and discuss strategies.
- Expert investment strategy insights with an eye to protecting and preserving capital.
- A partner with a deep understanding of the building blocks that make a successful portfolio and the role each plays in the greater strategy.
- A guide who knows how to manage drawdowns, to ensure a positive retirement.
Ultimately, says Palmer, a good financial advisor should focus on really understanding the changing needs and objectives of each client, specifically their stage in life as well as willingness and ability to take risks. “Armed with this information and insight, the advantage is that investment decisions regarding your portfolio are then undertaken by a professional who has his or her finger on the pulse of the market and who can proactively manage a portfolio to take advantage of ever-changing market conditions.”