Michael Durso, CFA® Founding Partner, CEO/CIO ShoreHaven Wealth Partners.
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"I work in finance; why wouldn't I manage my own money?"
Whether you're an investment banker, ETF wholesaler, or credit trader, you've likely had this thought at some point in your career. If you're like me, chances are your friends and family have sought your financial advice on more than one occasion, even if your expertise doesn't necessarily pertain to wealth management.
Before I started ShoreHaven Wealth Partners, people would ask me financial questions simply because they knew my father was a successful, long-tenured financial advisor.
There's a somewhat unspoken stigma: If your occupation relates to finance, then you should not only understand the ins and outs of financial planning but also must bear the burden of handling every aspect of your money.
It's an unfortunate misconception.
Alas, here's the cold, hard truth: You can be the most brilliant institutional trader on Wall Street, but that doesn't mean you're prepared to construct and manage a diversified portfolio, especially after factoring in the complexities that come with having a spouse, children, property, etc.
No one's saying you can't sit down and build such a portfolio. However, that's only one phase in an ongoing, multifaceted process.
- Can you adjust your financial plan as your life changes (e.g., buying a home, earning more income)?
- Are you prepared to mitigate overexposure and consistently rebalance your target allocation?
- Will you stay grounded during periods of volatility and remove biases from your investment decisions?
- Do you have time to exploit tax-loss harvesting opportunities throughout the year to maximize your net returns?
Alone, each facet of wealth management is feasible to oversee. Combined, it's a much more time-consuming responsibility—which can be particularly difficult for busy financial professionals.
Four Reasons Why Financial Professionals Should Consider An Advisor
Accountants hire other accountants to do their taxes. Physicians see other physicians for health checkups. Yet, financial professionals are often reluctant to offload their personal financial responsibilities. Let's explore a few reasons why you might reconsider.
Your job can cloud your perception. In terms of financial concepts, working in the industry has advantages. However, at the same time, the specifics of your position can negatively influence your monetary decisions outside of work.
In other words, when you're too in the weeds, you can lose sight of the big picture.
Bond traders can have bearish predispositions, whereas growth investors typically exude a bullish outlook. Removing these biases is a constant consideration. When you work with an advisor, you gain a voice of reason who can balance the scales.
You're still human. It may hurt to hear, but you're no more insulated from the psychological challenges of managing your own money than anyone else. We're all susceptible to behavioral traps, regardless of financial background. People always buy high and sell low; financial professionals are no exception.
Advisors remove emotion from the equation through logic-based investing and adherence to a defined, holistic, mutually agreed-upon strategy.
You're at a technical disadvantage. Before joining the family business in 2016, I worked at asset management firms for 10 years, so I'm familiar with firms' restrictions on employees. You may have to pre-clear trades or only buy off an approved list.
It's hard enough to be a successful investor from both a fundamental research and behavioral aspect, but when you layer on these stringent regulations, you can be at a significant disadvantage. By granting discretionary management to an advisor, you can circumvent these restrictions while appeasing your firm's compliance.
Your time is at a premium. Ultimately, it boils down to a straightforward principle; there are only so many hours in the day. If you travel 100,000 miles a year or routinely work into the evening, you aren't left with much time to manage your portfolio.
Of course, it depends on your role, level and company, but finance is a notoriously harsh industry. For instance, Wall Street Oasis found that the average work week of bank employees in 2021 ranged from 60 to nearly 90 hours, depending on the institution.
Even on the low end of that range, the core of your waking hours is committed to your day job. Factor out basic needs like sleeping and eating, and you're left with a handful of hours. Perhaps managing a portfolio is feasible, but what happens when you add a spouse's finances to the equation? Or kids and home? Not only does your free time dwindle, but your family's finances also become increasingly complex.
While you may work equivalent hours, that time is allocated to overseeing your money and keeping you on track toward your financial goals.
How To Know When It's Time To Speak With An Advisor
First and foremost, it's okay to admit that you need help managing your money. Second, there's never a wrong time to speak with an advisor—a straightforward conversation can help gauge where you stand.
Nevertheless, as your financial situation evolves, there are several signs to watch out for.
- If your finances keep you up at night, that's a bright, flashing indicator. Often, advisors find themselves in the role of a money therapist, talking people through the stress of financial planning.
- If your financial situation suddenly shifts due to career success or a cash windfall, it can drastically affect your lifestyle and wealth management needs. An advisor can serve as a sounding board and guide you through this unchartered territory.
- If you get married, buy a house or start a family, you'll have less and less time for your finances. An advisor can take a long-term view of your financial needs and keep you moving in the right direction.
- Lastly, while it may be difficult to admit if poor investment decisions impede your progress toward your financial goals, an advisor can help you get back on track.
And if none of these situations apply to you, I encourage you to adopt a proactive mindset and engage with an advisor. More often than not, I find the earlier you start, the better off you will be in the long run.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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