Urge clients to reconsider going DIY

As a full service financial planner, I’m tired of the newspaper and magazine columnists trying to convert everyone into a do-it-yourself investor.

Week after week there are articles preaching to the masses with come-ons like “buy stocks for $9.99,” “trade options on your own,” “ten reasons to hate mutual funds,” “five minutes to building an ETF portfolio,” and “be your own advisor and save fees”. In a world where few people balance their cheque books on a monthly basis, is putting them in charge of their life savings really in their best interests?

Last winter I met John, a 70-year-old man who lost 80% of his investments because he thought having 100% of his life savings in stocks was okay. He’s 72 now and his wife just filed for divorce because she “never thought my retirement would look like this.” Then there’s Mike, a retired pilot who had to sell his Toronto home for $100,000 below fair market value in less than a week back in February to cover sizeable losses suffered from trading futures on his own. And, I met Mary, who just lost her husband to a stroke and doesn’t even know where to begin dealing with the 200 stocks and option products that he used to trade every day.

The financial services industry in Canada is far from perfect: There are still too many financial advisors with questionable qualifications and advisor compensation is too focused on trades instead of advice. With rogues like Bernie Madoff tarring us all with a very dirty brush, it’s easy to see why even the best financial planners have a hard time demonstrating value to consumers.

But for financial writers, who have few or no credentials, to come out and say we’re all bad and that people should trust their own investing instincts is generalizing too far.

There are good financial planners out there – planners who use engagement letters, produce written financial plans addressing client goals, provide advice on retirement, estate, insurance, children’s savings, real estate, career finances, debt and cash flow. There are planners who meet with clients regularly to measure progress and adjust the financial plans.

There are planners who reached out regularly last winter to educate clients about the stock market correction, make portfolio adjustments as needed and hold a hand through a scary time.

My best colleagues stand ready to help manage the finances and be a rock of independent support when clients lose jobs, divorce their spouses, face death, disability and sickness. They explain fees, provide fee options, review fees annually and aren’t afraid to ask clients if they feel those fees are fair for the value they provide. Further, these planners have real credentials, solid experience and a caring, professional and ethical approach to their clients that makes them an essential part of the client’s inner circle.

These planners don’t deserve the bad press. In fact, they deserve accolades for helping clients reach their financial goals. In turn, these clients welcome the guidance, have zero interest in spending their free time in front of a computer screen trading stocks, and don’t mind paying a fair fee for unbiased advice. Why don’t the newspapers print stories about them?

A person’s finances involve a lot more than which stocks to buy. There needs to be a focus on goals, and an integrated financial plan crafted by a good advisor who stays in touch. There needs to be fee sensitivity and a value proposition that meets the client’s preferences for service, products communication and results.

If the average Canadian puts in a real effort to find a qualified, licensed and experienced financial planner, chances are the system won’t let him down.

Maybe hot stock tips and telling retirees to buy ETFs on their own sells newspapers, but what the readers really need to be told is that managing their finances is a lot more complicated than stocks and funds and $9.99 trades.