Hire a Coach or Go it Alone?

Note: There are many ways to describe someone running your life’s hard-earned savings. Whatever you call it [financial advisor, wealth planner, money manager, broker], we believe that person should be a financial coach focused on minimizing taxes, controlling for expenses and making your portfolio allocation work as hard as it should. We will refer to this fiduciary advisory role throughout the article as your financial coach.

Elite athletes train and seek coaches to convert raw talent into Olympic Gold, Stanley Cups, Heisman Trophies and Masters’ Green Jackets.

“Everyone needs a coach. It doesn’t matter whether you’re a basketball player, a tennis player, a gymnast, or a bridge player.” – Bill Gates

Elite athletes and executives know the value of coaching. The same is true in the world of retirement planning, investing, and wealth management. Studies show that investors who use financial coaches do better than those who try to manage their wealth on their own. Independent investors earn about 3% less annually than those working with a financial coach. Vanguard suggests that only one-fourth of private investors have the self-discipline to save, as well as having the time to research and invest on their own. For the rest of us caught up in the monotony of daily life, using a financial coach is a wise way to maximize wealth, making sure the money is working as hard as it should be. One benefit of hiring a financial coach to oversee your wealth is behavioral coaching. This means fears are kept in check when markets tumble, and unchecked optimism buttoned up in times of irrational exuberance. A Russell Investments study showed this emotional component as the single largest benefit of working with a financial advisor, providing additional earnings up to 1.5% per year of increased annual returns (on top of the 3% benefit of working with a financial coach.) A similar 20-year investor behavioral study produced in 2019 by DALBAR suggested that independent do-it-alone-investors get approximately half of the returns they could have. Poor market timing is the primary cause of this emotionally charged underperformance. We see the involvement of a strong financial coach as a winning way to mitigate the risks and portfolio losses of independently going alone.

“Love all, trust a few, do wrong to none.” – William Shakespeare

All financial coaches are not the same. Hiring a financial coach is part art and part science. Are they focused on doing what is right for you or hitting sales quota? Any financial coach worth considering should be vetted. Go to finra.org to see if former clients have lodged complaints. When selecting a financial coach, it is imperative that they are a Fiduciary. (This means they put your interests above all else.) Fee-only fiduciary financial advisors are the only kind of financial coaches who have a legal obligation to put your best interests first.  To a person with a hammer, everything looks like a nail. If your broker earns a living by transactions, our concern is there are incentives to make more transactions, not protect and grow your wealth. If your advisor earns a living by selling complex and possibly tax-inefficient insurance products, our concern is they may not be explaining the high costs and diminished flexibility those products create on your long-term plan. Big Firm Name or Knows My Name? We like to say “Bigger isn’t better. Better is better.” Large investment firms boast about their vast resources. We caution that these vast resources are primarily used to cross-sell financial products instead of solving tough financial problems. Recently one of our much larger competitors advertised they could define a client’s risk tolerance and suggest a custom portfolio within 90 seconds by the client answering four questions. No offense, they are wrong. Questions like these…

  • Can I afford to retire?
  • Do I have enough?
  • Will our money last?
  • Will my loved ones be okay if something happens to me?

…require a much deeper conversation with a team relentlessly focused on protecting and growing your wealth. Life happens, and sometimes it can get messy. Conversations about death, divorce, addiction, or a health crisis can be hard to have. Selecting a financial coach to walk you through life’s most challenging moments is a priceless way to protect your assets. We guarantee our process to determine your financial goals will take much longer than 90 seconds. We know by question number four that we will only be scratching the surface of what matters to you and your family. If you are looking for someone to have your best interests at heart, call us today. We are more than willing to provide a complimentary analysis of your financial affairs.