Why Hire a Professional Chief Investment Officer when You Can Just “Do It Yourself”?

Dear “do-it-yourselfers”:

We all have our own definition of “expensive.” In my role as a Stewardship Counsellor, I have the opportunity to learn what expensive means to investors – and their definition is usually as unique as the investor him or herself.

There are many instances in my life where I am asked my opinion on a certain stock, a financial headline, or what I would do if I were in someone else’s shoes. At times, I often wonder if mechanics or doctors (just to name a few) have the same conversations in off-duty conversations, as I do. “Hey Jim, my car’s got this problem when I try to start it…” or “Hey Betty, I got this pain in my lower back, whadda think I should do?…”

Each inquiry has little to no back story, or context, to provide an appropriate suggestion.

Similarly, I get the “so what do you think I should do with the markets behaving the way they are? “Do you think I should get aggressive and take advantage?  Or will it go lower?”

Don’t get me wrong, it’s important and flattering to me that people value my opinion but I am always puzzled as to why a pilot or a real estate agent would give themselves such stress trying to manage their family’s life savings. Not to allude to the fact they have nothing to worry about, but because perhaps they don’t trust the alleged “experts” or “professionals” to manage their money. And more often than not – I don’t blame them.

Since completing my undergrad, I have studied nearly seven additional years earning some of the highest credentials my industry has to offer. However, with that said, I can compete for a new client against a “financial advisor” who paid $600 and dedicated less than six weeks for a certificate.

If the new client can’t decipher between the two of us, one that sells investment products for commission and acts with the bare minimum legal obligation of suitability versus one that provides independent/objective advice for a percentage fee that is fully transparent and acts with the legal obligation of a fiduciary; then why expend the tens of thousands of dollars and years of your life – when that certificate could hold the same power of obtaining trust?

It’s an excellent question.

A Misunderstanding of Value and/or Expense

Sadly, most Canadian “advisors” have chosen the path of least resistance and the “do-it-yourselfers” have previous negative experiences with these “advisors”  – not once but countless times. They eventually got to the point where they said, “Screw it. I can study this point for six weeks and become my own advisor.”

Unfortunately, with this said, many do-it-yourselfers have one thing in common: a misunderstanding of value and/or expense.  Potentially they lack access to appropriate money management or have only run into these “advisors” that obtain trust quicker than most.

Nevertheless, I would like to give you an example of a recent do-it-yourselfer that asked for HighView’s opinion. The individual had a familiar tone of skepticism but we decided to complete a portfolio assessment and proposal anyways.

The results were in.

The individual managed their family’s portfolio and experienced a decline of $40,000 in 2015. Alternatively, with a similar asset allocation (and if he was a HighView client at the start of 2015) their families portfolio would have increased by nearly $54,000. When this was disclosed to him, he explained that he appreciated our assessment, but the possible $7,800 client fee was too expensive.

In other words, the family portfolio could have had a portfolio value swing of nearly $94,000 in one year, but he was concerned about the $7,800 fee as being too expensive.

Hence, here’s my definition of expensive:

• Historical returns cannot be projected into the definite future, but this $94,000 opportunity loss and the avoidance of potential future disasters (because he now feels he needs to take on more risk to recapture this loss) is expensive.

• The stress on the individual, as the family’s Chief Investment Officer, during times such as these must be hard. Having to explain to your wife and/or husband that your life’s savings has taken a hit… or that you wish you did “this” or “that” can’t be healthy for anyone. This toll on the body and/or family is expensive.

• The lack of appropriate planning, whether for your retirement, annual taxation, or estate can greatly affect your family’s ability to find financial freedom – or to ensure your hard earned money goes to the right people. This miss-direction is expensive.

Rarely do “do-it-yourselfers” cave and seek professional help. Especially when bull markets roar on like they did during 2009 to 2014. It only takes economic shocks and true loss for “do-it-yourselfers” to seek honest advice (over and above those questions in an elevator or at parties).

A Professionally-Designed Investment Portfolio Creates Peace of Mind

I am encouraged when a do-it-yourselfer makes the move and realizes the peace of mind they obtained.

For example, a client email received by HighView during the recent market turmoil:

“We were just discussing how much we do not envy our friends who manage their own money and do not have the benefit of professional portfolio balancing from experienced dedicated money managers with a strategic view and interests aligned with their clients.”

I can only hope more “do-it-yourselfers” understand the monetary and emotional expense of personally managing their money.  I hope they seek professionals that can take the sleepless nights away.  However, I caution them on their search to stray away from those with a “certificate”… Even if it’s in a nice looking frame…

HighView Financial Group is an investment counselling firm for affluent families and foundations. We build portfolios based on each client’s unique goals and tolerance for risk. Schedule a complimentary discovery session to see if we’re the right investment stewardship counsellors for you.

You may also be interested in:

• HighView’s 8 Founding Principles for Wealth Management [Video]
• 7 Warning Signs It’s Time to Change Your Investment Advisor
• High-payout Funds Are a Cash Flow Mirage