Many of us took up new hobbies in the early stages of the global pandemic, including cooking, reading, or gardening. Do-it-yourself (DIY) projects became the craze, and hardware stores were flooded with folks looking to try their hand at building a patio, remodeling a kitchen, or simply hanging new shelves. DIY projects are brilliant in some areas, but not when it comes to your financial wellbeing.
Managing your own finances is not free. The potential costs of DIY asset management and financial planning include:
- Lack of access to institutional mutual fund/ETF shares, thus paying a higher expense ratio
- Missed opportunities or making the wrong decision with your money
The first point can be quantified before you even invest, but the latter raises questions about known unknowns. And even worse: the unknown unknowns. Some questions to ask yourself:
- Am I an emotional investor?
- What is at risk if I mismanage my own investments?
- Do I have the time to manage my finances properly?
- Am I missing investment opportunities offered by the private markets?
- Do I have a firm handle on my entire financial life? Retirement planning, college, estate planning, spending, and cash flows, etc.?
Am I an emotional investor? What is at risk?
When managing your own investments, most do not approach the situation rationally, resulting in the “sell low/buy high” scenario.
Strong markets encourage buying, while drops can be frightening and influence the investor to pull back. See our article on The Investor Behavior Principle. At Janiczek, we have disciplined strategies that put us in a position to buy when prices are low and be defensive when markets are high.
Do I have the time to manage my finances properly?
Correctly managing your own finances requires a significant amount of time. Whether you are in the peak earnings stages of your career, planning for retirement, or retired, the many facets of your wealth likely take a backseat to other important priorities, such as time with your family, friends, or a busy work schedule.
An unmonitored portfolio, or worse yet, a nonexistent plan, can be very costly. Your finances are critical to you and your family and deserve the focus and dedication of a professional.
Am I missing investment opportunities offered by private markets?
Investors that participate in private markets can benefit from an illiquidity premium over marketable securities. Because private investing necessitates access to and knowledge of alternatives, it is a wise idea to partner with a reputable advisor or firm. Working with an advisor may also give you access to managers and investment options that you wouldn’t otherwise have, as well as reduced fees and smaller minimum commitments than investing on your own.
When it comes to private markets, Janiczek considers the trade-offs of devesting our clients’ money and we want to make sure we’re rewarded for locking up their money. Due diligence, particular access, and understanding of possibilities are required for strategies such as private equity, distressed debt, real estate, and direct lending. A competent financial advisor, like Janiczek, can systematically allocate capital to offer you a better risk-adjusted return.
Do I have a firm handle on my entire financial life?
Your financial picture is much more than asset allocation. It is incredibly unique to you and your situation. Wealth management is not only identifying the most tax-efficient strategy or funding your children’s college, but it is also uncovering your unstated goals and needs, providing you with a plan forward.
As with most professionals, there is a fee associated with a financial advisor’s skillset. However, Vanguard’s Advisor Alpha® study attempts to quantify an advisor’s value proposition. The findings indicated that an advisor could add a net return of about 3% for clients*.
DIY investors can get by, but to live a fulfilling life with confidence in your present and future financial life, Janiczek Wealth Management believes a financial advisor needs to be in the picture.