It is feasible to handle your portfolio and financial worries as a DIY investor without the assistance of a financial professional. When you’re young and your portfolio is small, it’s certainly achievable. Is it, however, prudent to continue doing so permanently if you are a successful expatriate with a demanding professional career?
Armed with the fundamentals of a solid investment philosophy, the skills to develop a portfolio, and an understanding of the significance of staying calm in the long run, you may wonder: Why do I need a financial consultant?
Expat Wealth At Work have a saying: Goals. Plans. Portfolios. The portfolio or investment part has been effectively summarised. It’s the final piece of the puzzle, and even though we wrote many blogs about it, it’s often overstated when people think of financial advice.
The portfolio supports the strategy. The plan lays out the strategy for achieving your goal. What is the use of a portfolio if there is no goal? Each investor must explain what money means to them and what they want money to do in their lives. That is the intention. A good financial consultant begins there!
We are biased about our worth, yet even with a solid set of standards to follow, managing your wealth is difficult and time-consuming. We wish you success if you see managing your wealth as an enjoyable outlet, a genuine source of pride, and something you want to pursue, but not everyone does. While DIY choices may appear enticing, investors must determine whether they truly want to run their own affairs, as half-hearted DIY initiatives can be costly.
We feel that a committed individual could use our assistance to manage their portfolio, but the portfolio isn’t everything, so think about who you listen to on this subject. There is a small but vocal group of do-it-yourself investors who are well capable of managing their own fortune. They spend a lot of time on internet forums, creating spreadsheets, listening to podcasts, and reading books that are more complex than our blogs. When they’re not doing this, they’re trying to get less committed investors to do the same.
This is ego at work. It’s a brag, not genuine compassion and understanding. It’s not that they’re untrustworthy or ignorant of the subject. Many people are quite clever when it comes to investing. They may know everything there is to know about investing, but they don’t know you.
Theory of mind refers to the ability to comprehend that other individuals have views, goals, knowledge, and emotions that differ from our own. DIY investors on a mission to convert more customers are frequently unaware of this concept. Financial consultants are constantly listening and questioning why someone walks through their door. There are numerous causes for this, but at its root, a person may be too busy, incapable, or unwilling to spend time managing their wealth. They would rather do something else with their time.
Choosing whether to be a DIY or guided investor raises various issues:
- Which of these individuals are you?
- What do you want to do with your time?
- Are you devoted to managing your wealth throughout your life?
- Can you accept and implement the advice?
Everyone can benefit from financial advice, but not everyone wants it or has the attitude to receive it. Some people seek complete control and the freedom to do their own thing. Others find it difficult to lose control. These questions should be asked early and honestly. Knowing who you are eliminates the need to start a potentially frustrating relationship.
Do-it-yourself Investors do come to us and hand over their assets. They found themselves in a financial fog while being successful in business or in their careers. Others who seek a second opinion are astonished by their mistakes. Mistakes in technology and strategy can be costly. Asset structures, legislative issues, tax and estate planning, and asset and business selling information can all be confusing. Genuine desire becomes a problem when the opportunity to delegate becomes a reality.
The ability to delegate is both a skill and a realisation. The willingness to accept a rational second opinion. When someone welcomes delegation, we believe they have realised what matters: time!
Time is the most valuable resource we have. It is a gift to be able to spend it doing what we want with people we care about. That is why our advice does not focus solely on money. We advise our clients to approach money with one goal in mind: to guarantee that it allows them to spend their time doing what they enjoy most with the people they care about.
When we achieve understanding, time becomes a reality. Good advice provides clarity. It discloses the current situation, clears the road, and provides insight into how to achieve goals. Good financial guidance allows you to unwind and stop stressing about money. It entails outsourcing investment and technical matters while receiving assistance in making sound decisions.
Breaking first, then braking
In turbulent markets, investors may make rash moves. The market then recovers, and the cash-strapped investor misses the rally. We haven’t stopped everyone from selling out; the final decision is up to the investor, but we’ve been the buffer that has averted a major mistake 99% of the time. This poor behaviour is frequently highlighted by the advisory community as one of the reasons why investors require a financial consultant and assistance, but it would be incorrect to assume that only during difficult markets do investors make mistakes.
Market corrections are sometimes met with lectures on resilience and stoicism. These may work as a general strategy during a storm, but what happens when an investor is ready to make a major mistake on a beautiful day? What is the catalyst? It’s unlikely that quoting Greek and Roman stoics or evoking Winston Churchill will assist. While the decision will have a financial impact, the reason may be far from financial. What is the motivation for the action? What changes have taken place in the investor’s life? The financial consultant’s role is to establish a strong enough relationship with you that they recognise what activities are out of character for you and feel comfortable asking you honest questions about your decisions.
Everyone can control their own fortune. Financial markets are more open and democratic than at any time in history. The way people behave is not democratic. Behavioural coups can occur at any time, even after years of stability. A single bad decision can derail a 25-year plan. We’ve seen rational people at all stages of life be swayed by absurd speculations. They would have lost a big chunk of their riches if they had acted. It is a financial consultant’s job to put a stop to such misbehaviour. Good guidance is about assisting in making sound decisions.
Who can I put my trust in?
We may not be able to accept you as a client owing to circumstance, or availability, but we would be irresponsible if we did not emphasise crucial characteristics a financial consultant should possess. The media will create lists of questions to ask when selecting a financial consultant. Many journalists are unaware of what an ongoing advisory relationship entails. From the outside, journalists will create boilerplate lists to generate material. The following questions can rapidly reveal a financial consultant’s genuine agenda:
The discussion. The emphasis should be on you and what matters to you. A financial consultant should be attentive and questioning. We talked about “theory of mind” before. Your objectives and motivations should be acknowledged since they drive the process. Understanding yourself and what you desire can be combined with a realistic appraisal of your situation. It’s all about recognising potential roadblocks, finding the best technical solutions, and eventually charting a realistic path to your desired objectives. Financial advice is not a transaction. There should be no overt emphasis on the financial consultant, their credentials, expertise, alleged compassion, or any other personal selling aspect. Genuine enthusiasm sells itself.
A financial philosophy. A financial consultant does not need to go to the trouble of writing a book, but they do require a paper outlining their values and investment philosophies. The evidence utilised in this document is significant because it provides a consistent set of criteria around which portfolios are created for all scenarios. A lack of proof may indicate sloppy portfolio management. A change in the market, economic conditions, or underperformance by their expert fund manager implies that your portfolio will be altered. You don’t want a financial consultant who is constantly responding and pursuing performance.
An evidence-based investment strategy should imply that the financial consultant is product-agnostic and will design a portfolio at a minimal cost. It should also be verified that there is no conflict of interest between the financial consultant and the fund manager. Simply put, the consultant works for you.
Performance. Any improvement in performance can only be obtained through increasing risk, and there is no guarantee that it will occur at all. If a financial consultant makes performance guarantees of 15% or more per annum, you are entering a relationship that will most certainly end in frustration and disappointment. To put it simply, financial consultants who promise high returns are either dishonest or incompetent. They are either attempting to gain your favour or do not understand markets.
Understanding, analysing, identifying methods to improve, providing clarity, assisting with excellent decision-making, and modifying as your circumstances change are all parts of financial guidance. It can be a wonderful connection that lasts for decades and through all stages of life.