Broker Check

Could I Be My Own Financial Advisor?

October 01, 2020
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With an abundance of low-cost mutual funds and personal finance websites out there, most of us are going to ask the question at some point: Do I really need to hire a financial advisor? If I play it safe and save a lot, isn’t that good enough?

I’ve seen some people pull it off, but think it through carefully. The stakes are high, and the choices can be complicated. A professional can help make a difference. And if you think you’ve got it all figured out, you might at least consider hiring someone to see if you’re heading down the right path.

So, there have been multiyear stretches where managing your own investments may have been easier. I can’t argue with that. However, I’ve seen it happen: one critical mistake can set you back.  

You may have read that all you need is a handful of diversified funds then set it and forget it. But wait: what about rebalancing the portfolio? If, for example, as part of your equity allocation you own 70% U.S. stock and 30% international stock; and then for the next year or two international outperforms the U.S., you could end up with 45% international and only 55% U.S. I’ve known people that created a thoughtfully diversified portfolio, only to get so busy with work and family that they look back years later and realize they may have missed out on potential gains because they took their eye off the ball.  

I’ve had other clients who have multiple portfolios, one for the long term and the other is their “play account” where they buy and sell stocks. One guy I know had been doing it for years as a hobby. I was impressed with his philosophy and one of the few people I’ve seen that I trusted on his own. The problem was he was buying and selling stocks in his non-retirement brokerage portfolio while his IRA was for the longer term. Do you see the potential problem?[2] Every year he was incurring potential tax liabilities in the brokerage account when he was buying and selling stocks.  After our conversation, he made his IRA account where he buys and sells stocks to defer the taxes and made his brokerage account for the long-term strategy. This ended up helping him reduce his tax liability from just this one piece of advice. 

Here’s another example: I’ve seen very successful families with lots of assets and real estate…but no will or estate plan. In fact, many of the clients that I start working with have no wills or outdated wills. It’s one of the first things we’ll talk about to be protect their family and assets. 

There is a tendency of people being overconfident when they think that if they are maxing out their 401k for their retirement and then contributing to a 529 Plan for their kids, they are doing enough financially and will be fine. Time and time again I show clients why their overall savings rate may not be high enough to achieve their retirement and other goals. In addition, they could be missing out on better investment choices. Other clients don’t have updated beneficiary designations on their life insurance policies. Very often, I’ve seen where an ex-spouse has still been listed as the beneficiary because of oversight.

 Here are 3 Personality Traits that may provide more insight into making the decision of using a financial advisor.

1- Do It Yourselfer

        You may be one of these DIYers, loving the research every week to keep up with your finances. Some of us, typically analytical and problem-solver types, are wired this way. If you can remain diligent, put the time and effort consistently in to be on top of your finances, you can potentially make this work. Some people may start out like this and do well. But in my experience, as they move up the ranks at work or their family gets larger, managing their finances tends to fall by the wayside. As life gets more intense, digging into these matters on a weekend can lose its appeal quickly.

2- Trying to Figure it Out / Don’t Like Paying Fees

        Early on in life this was me. I took the time to learn and make sure I was making good financial choices. At the same time, I was, and still am, very thoughtful with money so I was conscious of fees I was being charged. Maybe you are unsure of how financial advisors get paid, but whatever it is, it’s more than zero. “I can do this on my own and save a little money.” If this describes you, I have found two main ways this could end up.  

A.    If you are consistent with your efforts, it may be worth paying a financial advisor an hourly fee to review your overall financial situation every year or two to be sure you are on track. 


 B. Many of the people I have worked with or talked to fall into this category. “I tried to do it on my own for a while but life got too busy. The last couple of years have been hard and while I should have called you long ago, I never got around to it. Now, fill in the blank (my kid is heading to college soon, we want to retire, we need to buy a bigger house, etc.) and we are not prepared. Now what?” They start searching for a financial advisor

3- My Focus is My Family and My Job   

        This category is where my typical clients come from. It sounds something like this in our first discussion.  “Look Keith, I love my work, but it keeps me busy working long hours. When I do have free time, I want to spend it with my family and creating memories. We make good money and have done well, but I don’t think I’m being a good steward with it. I’m looking for a professional who can guide me, be proactive, communicate and be there when I have financial questions. I want to make good choices, and I’m worried about making stupid mistakes.” Maybe you are laughing at those comments, or maybe this describes you exactly.   

Most people think my main objective is to focus on a rate of return. That’s only part of it. One of my key goals is to keep clients from making expensive mistakes. In a 10-20 year period, maybe investments perform the same if people manage it on their own. But then there’s that one or two times they may make emotional decisions without consulting a professional. I’ve seen it create challenges for smart, hardworking people. Sometimes they realize too late the amount of money they lost vs. alternative decisions they could have made after consulting a financial advisor.  

I can’t promise a client that I’ll get them a better rate of return year after year on their portfolios, and be wary of those who do. What I can promise though, is that by working with me, they can feel more reassured with the financial decisions they make. And not only do they have a professional looking out for them, they get the confidence that we all want when it comes to money.

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Keith Taylor is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Centerpoint Wealth Strategies is not an affiliate or subsidiary of PAS or Guardian. CA insurance license #0G13915. 2020-105571. Exp 7/22

[1]Diversification does not guarantee profit or protect against market loss [2] Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation