How Much a DIY Approach to Your Financial Plan Really Costs


Let’s say you have the time, skill set and desire to tackle your own financial plan. After all, who knows the financial future of your dreams better than you?

Investors today have more tools and resources at their disposal than ever, making it entirely possible to DIY financial plans. One key consideration that often gets overlooked, however, is how much the decision to take a DIY approach could cost you in the long run.

The Cost of Inaction

Simply put: time lost is money lost. Whether you procrastinate the act of putting the financial plan itself together or unintentionally hold up various aspects of the plan to research the “perfect” next move, time truly is of the essence when it comes to money matters.

Let’s assume you nailed the wealth accumulation phase on your own and put aside $1M in Roth IRAs, employer-sponsored 401ks and various index funds by the time you were 45 years old. Well done!

Fully recognizing that the accumulation stage looks a lot different than distribution and wealth preservation stages, you decide to study up on what comes next.  But you’re still busy working hard on the career that let you accumulate in the first place.  Before you know it, years have passed and you still haven’t gotten so far as calculating how much you’ll need to live off of in retirement. So much time went into research and planning that the ball was dropped on execution of your DIY financial plan.

So, what was the cost of that decision?

While you were busy thinking about the next few million and how to make your hard-earned money work for you over longer periods of time, another investor decided to enlist the help of an advisor at the onset and was able to realize annual tax savings opportunities, allowing them to put more into their investments to grow their net worth over time.

Additionally, they worked with the advisor to rebalance their portfolio year after year, ensuring proper diversification as they aged. The result: the initial $1M had a chance to work harder for the investor and had the added benefit of time for these investments to grow while they remained focused on what they were really good at: earning wealth through their career.

Still not convinced rebalancing matters? Read this post to understand how the simple, but critical task can impact long-term returns.

The Risk Roller Coaster

Do you know what your true risk tolerance is?  If you answered yes, what expertise are you using to back up your gut instinct?  How have you quantified your risk tolerance?

Investing is inherently risky, so it’s risky to not take a rigorous approach to gauging your risk tolerance. Not having professional expertise on your side could lead you to take too much risk that may cause you to react emotionally and sell at the wrong time.

Equally problematic is not taking enough risk in your investment approach, which could cause your portfolio to underperform your required return for your retirement years.

Advisors can evaluate and understand how a client’s risk matches up with their portfolio, and then create a portfolio best suited for the client. By having clients complete a comprehensive risk questionnaire, advisors can create an individual portfolio with the proper asset allocations that takes the appropriate amount of risk according to your risk score and is tailored to your financial goals.

Your financial plan is the house in which everything you’ve dared to dream for your financial future lives. You are the owner of the house and the decision maker who will make the picture you’ve framed a reality. You certainly can do financial planning yourself, but that doesn’t mean you should.

The Emotional Toll

Money is personal. Not only can it be jarring to see the results of a market downturn on your portfolio seemingly overnight, but it’s also stress-inducing and can lead to reactive, impulsive decision making that causes you to stray from the financial plan specifically designed to get you closer to your goals.

Unless you have the unique ability to take a truly objective approach to all aspects of your financial plan – including being able to weather the storms that financial markets bring without making rash decisions – chances are that the toll your emotions will take on your long-term financial success will be significant.

And let’s be real: can anyone honestly say they can be objective 100% of the time, especially when it comes to something as emotional as personal finance?

Undoubtedly, the cost of a DIY financial plan compared to that of one prepared with the assistance of an advisor will vary due to each individual’s unique circumstances. And there’s no way to predict the inherent volatility in equities investing, so results are not guaranteed.

Still, the analogy I encourage those in my network to think about when choosing to go at it alone or enlist the help of a trusted advisor is this: if you’re not a licensed electrician, would you try to wire a house yourself? Isn’t it worth the investment to hire an expert to avoid potential hazards?

If you have questions or still are undecided as to whether you should DIY your financial plan, let’s talk. Schedule a time to speak so we can help you analyze the risk in your current portfolio and help you make an informed decision about having the right advisor in your corner.

Past performance is no guarantee of future results, and CornerCap strategies, like most investment strategies, involve the risk of loss.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable.  All investors are advised to fully understand the risks associated with any kind of investing they engage in.

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