When it’s time for Noel D’Souza to update his financial plan, he turns to the expert – himself. As an experienced certified financial planner and money coach at Money Coaches Canada Inc. in Toronto, he believes the do-it-yourself approach just makes sense.
“It’s kind of like any other professional, [a mechanic] fixing their own car or [a contractor] building their own basement,” he says. “If you have the tools, knowledge, experience, and confidence to do it, chances are you’ll be successful tackling that.”
He’s far from the only one who feels that way. An InvestmentNews Research survey of 400 advisors in the U.S. conducted in June revealed that more than half of all financial advisors have never hired another advisor for help with their household and business accounts. In fact, 29 per cent had ever used one in the past, and only 16 per cent were currently doing so.
And while 33 per cent of survey participants admitted to bouncing ideas off others in their firms about investments informally, and another 24 per cent said they had spoken to advisors outside of their firms for ideas, almost half (48 per cent) handled their portfolios completely on their own.
Greg Pollock, president and chief executive officer of Advocis, the Financial Advisors Association of Canada, says he has had many conversations about this exact topic with advisors over the years and has a few ideas why they don’t always seek financial advice from colleagues. For starters, they’re only human.
“People have the best intentions, but they don’t follow through. It’s the last thing on the list for them. They’re dealing with financial matters every hour of the day, so their own financial issues get pushed down the list,” he says.
Then, there’s the possible embarrassment factor. Mr. Pollock says advisors might feel awkward opening their books to others in the industry or finding out that the way they handle financial planning is different than how others do it. As such, professional pride is on the line.
“They might be thinking, ‘Maybe I don’t want people to know I do it that way because maybe they’re going to think I’m not very good at what I do,’” he says.
However, Dilys D’Cruz, vice president and head of wealth management at Meridian Credit Union in Toronto, says she’s not at all embarrassed that she uses an advisor at her firm. Although she has her personal financial planner designation and has taken the Canadian Securities Course – enough training to develop her own plan and execute it – she would rather offload the task.
“I could do it, but I don’t have the time or the interest,” she says.
Besides, because her advisor is bound by a confidentiality agreement, Ms. D’Cruz says she feels comfortable that her financial records will remain private. It’s not like she has a problem discussing money either, adding, “When you’re in the financial services industry you kind of get over that.”
She didn’t actually go looking for an advisor at Meridian, initially. Gun shy after hiring an advisor who never delivered a financial plan after repeated requests and stopped regular contact, she’d moved her money into direct investing. It was just sitting there.
But when one advisor on her team took the initiative and asked Ms. D’Cruz if she already had a professional financial planner, she told him her story. Soon, they were sitting down and talking about her goals. He took the time to get to know her. Today, he’s one of her trusted advisors.
Furthermore, she has convinced more than 60 per cent of the company’s top leadership to use the firm’s advisors, too.
Just recently, Ms. D’Cruz sent her out an informal, impromptu survey to find out who handled her team’s financial plans. Of the 50 who responded, 26 said they used an advisor. While senior advisors were more likely to handle their own plans, the younger or more inexperienced ones were far more open to working with someone else. And a full 70 per cent of survey participants admitted they would consider using an advisor in the future.
The most popular reasons? They could use help with complicated retirement planning, but also liked the idea of having an objective sounding board. They thought handing the job over would save them time, too.
Mr. Pollock says having someone provide sober second thought could come in handy especially as markets grow rocky.
“Financial advisors are pretty good at being cold and objective when they need to be for their clients, but when it comes to their own personal finances, I think many of us still end up being very emotional about them,” he says. “It’s very conceivable that we won’t make the best decisions in our best interest.”
Then, there’s the nudge factor. When professionals are busy working for clients, they can forget to focus on their own financial plans, even when it’s time to give them an update. Hiring an advisor who’s on top of the schedule can fix that.
Even so, Ramzy Saad, associate portfolio manager with SV Wealth at Raymond James Ltd., in Markham Ont., says although he handles his own financial planning, he’s not worried about falling behind. Working with clients acts as a natural nudge.
“Because we’re in this profession, we’re always asking our clients questions. So, whenever we ask one, a lot of the time we step back and think, ‘How would I answer this question?’ Our feedback loop is active. We’re constantly thinking about this stuff for ourselves.”
While Mr. D’Souza is comfortable working on his own financial plan, he would hesitate if he also had to consider a spouse, too. He worries he might make assumptions about that person’s goals. In that case, having a third person in the room asking the right questions would be helpful.