As a financial planner, I am biased towards suggesting that investors seek out help. That being said, let me share a quick story to give more context to this debate and my suggestion to hire help.
You Can Get by Okay On Your Own
When I bought my first home in May 2010, I was dead-set on having a big yard. With that bigger yard came bigger responsibilities. I had to spend time and effort cutting the grass and maintaining the lawn – something I never needed to do before.
Initially, it took me about two to three hours to mow the lawn. Eventually, I got efficient enough to finish the job in roughly 90 minutes. I always felt that the time commitment was manageable and the result was pretty good.
There were some occasions, however, where I didn’t have time to cut the grass on the weekend. Sometimes that was due to other commitments and, admittedly, sometimes it was just due to laziness.
Longer grass meant it took longer to cut the next time and the lawn didn’t look as nice. What was worse was when I put it off a day without looking at the weather, only to be surprised by three days of rain. Then cutting the grass really became a problem.
All and all, I got by just fine. My lawn looked pretty good. Then I saw what it looked like when a professional did the job.
There’s No Substitute for Expertise
The summer my son Tommy was born, I decided to hire a guy named Leo to cut the grass for $35 a week so I could spend more time with my wife and newborn. This was one of best decisions I’ve ever made.
Leo did the little things I wouldn’t have thought to do or known how to do properly.
He periodically changed the direction in which he cut the grass to encourage healthier growth. He fertilized and seeded strategically. He cut the grass a specific length depending on weather conditions or the area’s exposure to the sun. He edged around our flower beds and plants.
The end result was a drastically healthier and superior-looking lawn. But even more importantly, hiring a professional gave me more time to focus on the things that are most important in life.
It’s Not Complicated, But Mistakes Are Costly
One argument for do-it-yourselfers is that they are saving money by not paying someone (regardless of the service they’re DIYing). Another is do-it-yourselfers simply enjoy managing their own money (or maintaining their own lawn).
These are fairly similar to the reasons that I chose to cut my grass. However, the big difference is that making a mistake in your lawn has far less severe consequences than making a mistake with your finances.
Mowing your lawn isn’t rocket science and you can get the job done on your own. But having someone who specializes in lawn care and maintenance dramatically changed the outcome (both in terms of a better lawn and better overall quality of life, since I got hours of my time back).
Investing isn’t necessarily rocket science, either, but the stakes are much higher. A mistake you make through DIY investing can cost you huge amounts of money.
Investors unknowingly make a lot of behavioral and emotional mistakes that add up to dramatically worse performance. Unfortunately, this isn’t always obvious because they don’t have the reporting or tools to truly evaluate their performance.
The Difference a Financial Advisor Can Make
Financial advisors have tools and processes to dramatically improve your investment implementation and outcome.
Research from Vanguard estimates that financial advisors can add about 3% in relative return to an individual investor. That’s great by itself, but your decision to hire a professional shouldn’t be only about investments.
Choosing an advisor that provides comprehensive financial planning beyond traditional investment advice can get your entire financial house in order and keep it that way forever. Real financial planners will proactively assist in estate planning, tax projections, insurance analysis, entitlement strategies, and more.
Perhaps most important of all, hiring a professional frees you up to do the things you love most in life and alleviates the stress that can come from managing your financial matters.