In the past several articles, we’ve looked at the variable nature of prices. What does a gallon of milk or a hotel room cost? How much does it cost to retire? What types of financial management services are there, how much do they cost, and which one might work best for you? In that vein, why pay someone to manage your money?
I recently told the story of a client who experienced immense relief upon delegating the management of her finances. Making all the decisions on her own had left her plagued with fear and anxiety. My listener exclaimed, “But my father said never to pay fees!” Such advice might be good for one person, but not so good for another. While I agreed that one should pay as little in fees as possible, my listener’s objection raised the question: What are some of the reasons to have your money managed professionally?
Paralyzed by fear of the responsibility
Many people experience fear and anxiety where their money is concerned. Emotions can get in the way of making good decisions, or any decisions at all. Fear of making a mistake, fear of losing money, and fear that you don’t know enough to make the right choices, all can result in a state of paralysis. If the funds are inherited, your feelings about them may be colored by the relationships you had with those who left you the bequest.
A professional manager brings objectivity to the task. Lacking your emotional history, he or she will listen to your concerns and suggest the best options to meet your financial needs and goals. Delegating some of the responsibility for making these decisions can lift a huge weight off your shoulders.
Little time or interest in doing the work
Yes, it takes time to learn about investing. You could spend a couple of hours reading on the Internet to come up with a reasonable investment strategy. Maybe you have heard that indexing is the way to go and you just need to buy “some of those.” Which ones make sense? How much do you buy in each index? You need some bonds, too. Which investments have the lowest fees? Which are best in the IRA?
Perhaps you thought you could just go “DIY” on the whole investment thing, but now you realize it’s not that simple. There are many issues to address. Not only is it time-consuming to understand and answer the questions – it takes even longer to answer them correctly.
Then there is the process of implementation – buying, selling, and rebalancing. When are changes needed, and what are they? Some people believe they can just “set it and forget it.” You may get away with doing something like that for five, or maybe even ten years, but such a strategy could come back to bite you. If you can’t put in the time or acquire the knowledge to do the work competently, why take the risk of being an ineffective steward of your assets?
You would rather delegate to an expert
You do some things really well. You’ve gone to school and have worked for years in your field. You appreciate the value of your own expertise. Investing is not your area of expertise. Delegating makes a great deal of sense to you. (However, be sure to evaluate your financial manager’s credentials carefully before committing.)
Do you feel burdened by the responsibility of managing your money? Do you lack the time or interest to handle it, acknowledging that it’s not your strong suit? If you recognize that delegating the responsibility to a qualified person makes sense, you will want to find out what this actually costs. What is it worth to you?
These are some of the reasons to hire someone who can manage your money. It’s difficult to put a price on peace of mind. We want to be good stewards of the money we have worked for, saved, or inherited, and prefer to avoid making costly errors. Please let me know if I can help you make a decision about managing your money that is right for you.