Should You Really Do Your Financial Planning Yourself?

Should you hire a financial advisor or handle your finances and investments on your own? It may not be the million-dollar question, but the wrong answer could lead to a very expensive mistake!

If you’re just diving into the financial world and contemplating whether to hire a financial advisor for the first time, chances are your hesitation probably stems from the cost of hiring a professional.

  • Which option is going to save you more money?

However, when it comes to investing your hard-earned money and finding a way to make sure it’s there for you when it’s time to retire, there are many other questions you should be asking.

  • Which option saves you more time?
  • Which option is likely to provide you with the best outcome?
  • Which option will help protect you most from a potentially bad outcome that could cause you or your family financial stress in the future?

There’s a lot at stake when it comes to managing your life savings. When investors decide to handle their finances on their own, research shows that many (if not most) unknowingly fall victim to behavioral biases and make emotional mistakes. Emotional investing can be very dangerous!

For example, we’re currently seeing near-record low interest rates. In addition, people are living longer, meaning your money may need to last longer than you think. Your retirement goals probably don’t include having to go back to work when you’re least able to generate more money. So, when a “hot opportunity” comes about, some Do-It-Yourself investors may jump in with two feet, when a professional with experience in the industry may pass, taking an objective look at what it could do to your plans of reaching your long-term goals. Remember the dot com crash?

Because of situations like this, it’s important to consider whether to hire a financial advisor. In other words, the question should really be, does professional financial advice usually pay for itself, or not?

I wish I could give you a straight “yes” or “no” answer, but unfortunately, it’s not that simple. Why? Because not all financial advisors are created equal. Not all financial advisor firms provide you with the same benefits. Not all have the same experience. Not all have worked with situations like yours.

 

Linscomb & Williams has been in the industry for more than 40 years and was one of the first fee-only fiduciary financial advisory firms in Texas. Contact us to see if we’d be a good fit for you too.

 

Peace of Mind 

Are you sure you have the time, experience and knowledge to tell a good investment from a bad one? Are you confident that you’ll stay up-to-date on financial and estate planning laws? Are you aware of every tax benefit and program you qualify for that can help save you money in your investments and retirement plans?

A fee-only fiduciary financial advisor, someone who legally must put your best interests before theirs, who has the right qualifications and experience may provide a peace of mind that allows you to worry less.

Getting professional advice can help you avoid costly mistakes and therefore, save money in the long run.

Power of Scale 

Another thing to consider should be the power of scale. This scale can give you access to cost efficiencies that many individuals can never obtain on their own. This will vary for each firm you interview, but at Linscomb & Williams, we manage more than $3 billion of our clients’ assets. This can provide significant cost advantages in certain areas that can benefit clients, as well as provide some other unique benefits.

When it comes to managing any amount of money long-term, more skilled analysis is almost always better than less. Given our scale, we have the ability to retain full-time analysts. These talented analysts help us fully examine and thoroughly investigate all portfolio ideas, which allows us to make well-informed decisions for client portfolios.

If you decide to handle your financial future on your own, you would likely not have this monitoring capability. Instead, it would require a significant commitment of personal time to monitor the portfolio and keep your own research current. Not every financial advisor firm will have this capability either, so be sure to ask about how a prospective firm monitors its client positions.

Scale also gives large advisory firms the ability to pay for outside research that might be impractical or cost-prohibitive for an individual or smaller firm.

Just 25 years ago, access to information and data was a key differentiator for advisory firms compared to individual investors. Today, there’s a different issue. With “information” and “data” everywhere, the struggle now is to find the right information and data that is valuable.

Large financial advisor firms may also have access to institutionally priced share classes of mutual funds that may not be available to an individual investor.

What About Your Other Financial Needs?

Another value that working with a professional may provide is help with other financial needs, such as estate planning, risk management and retirement planning. Firms like Linscomb & Williams that take a comprehensive financial planning approach will be able to provide support in many areas. If there is not an estate attorney or accountant on hand, a firm may have connections that will prove to be valuable over time.

Terms to Look For

We can’t stress this enough: Not all financial advisor firms are created equal. When interviewing firms, make sure to ask: 

  • Are you fee-only?
  • Are you a fiduciary?
  • Are you a Certified Financial Planner (CFP)?
  • What services do you provide?
  • Can you help me with other concerns – estate planning, tax-planning, etc.?
  • How long have you been in the industry?
  • If you’re looking for a financial advisor in Texas, how long have you been in the area and are you aware of local programs that will benefit me?

Choosing a financial advisor to work with and protect your hard-earned money is not a decision you should take lightly. If you do decide that hiring a professional is the cost-effective choice, please make sure you’re working with the right firm for you. A little homework now can save you a lot of time, stress and money in the long term.

 

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J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams is Linscomb & Williams' Managing Director, Chief Executive Officer and Chairman.

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