Thanks to the internet, we now live with unprecedented access to information. With millions of tutorial videos and websites just a few taps away, the world is a consumer’s oyster. However, just because you can easily access a huge amount of information, that doesn’t make you an expert. After all, watching hairdressing videos in lockdown wasn’t enough to match the quality of cut that we get from the professionals. The same is true of investing; we can all have a go at doing it ourselves (and some do very successfully), but you would be best advised to do your research on every decision, to tread carefully and be patient.
The rise of the DIY investor
More people are becoming DIY investors. On top of greater access to specifically created platforms for self-investing, these people are increasingly critical of the costs they may have to pay for advice.
It may be easier than ever to become a DIY investor, but it means missing out on many valuable benefits that come with regulated financial advice. The industry is vast, containing product providers of all shapes and sizes with numerous ways of managing investments. If anything, DIY investors could fall victim to information overload when trying to research these options themselves. Misinformation can unfortunately be a real risk for the DIY investor sector, with other individual investors providing tips and ‘advice’ when they’re not bound by the same regulations and qualifications as investment managers or chartered advisers.
Where financial planning comes in
Wealth managers can create comprehensive financial plans for clients, mapping out individual circumstances and providing a plan which is worked on adapted throughout the relationship. Investing is just one part of this.
A thorough financial plan will build in your lifestyle (including holidays, retirement plans and second homes) as well as vital matters such as rainy day funds, care costs and pension pots. A considerable amount of work and knowledge will go into this, which is near-impossible to replicate on an amateur level. New DIY investors can frequently underestimate the time allocation to prepare a plan of this detail themselves, let alone manage the process of putting it into practice and regularly review and adjust both the financial plan and corresponding investment strategy. What’s more, as investment managers aren’t managing their own money, they will be less likely to make emotionally-driven decisions, especially in times of increased market volatility.
With investing, wealth managers will ensure portfolios are playing a vital role in their clients’ financial plans and that they are not taking on too much risk. At the same time, a wealth manager will also command a greater knowledge of the investing landscape in general. With growing interest in ESG and the impact of your investments outside of the financial world, investment managers are able to skilfully negotiate the growing issues in this field and match a clients’ desires with what they own in their investment portfolio.
Responding to global events
The performance of most investment products is driven by global market valuations, which themselves are determined by (often unpredictable) global events and trends, ranging from natural disasters, civil unrest, geopolitics, and now pandemics. The ability for individual wealth managers to analyse policy impact, to analyse historically similar situations, to consider the personal requirements and time-horizons of their clients and to react accordingly in the positioning of their portfolios has the potential to add significant value versus portfolios managed without this level of care and attention.
Unprotected Investing
Doing your research on every decision is vital. When a DIY investor acts as their own wealth manager, they are taking on responsibility for their own decisions. By not taking regulated financial advice, they may not be able to access the protections afforded to them by the Financial Ombudsman Service or Financial Services Compensation Scheme.
Wealth managers are regulated and authorised to give financial advice, they are there at the service of the client. A DIY investor will have to juggle their self-made financial plan and portfolios with keeping abreast of market movements, monitor industry news and handle the administrative burden while also juggling their work and family lives. Hiring a qualified and experienced wealth manager takes away a lot of this burden.
At London & Capital, we respect DIY investors for taking their financial futures into their own hands. However, they can still be hands on with the construction of their financial plan while also letting a qualified wealth manager do all the work for them.
To find out how your financial plan could benefit, please get in touch using the contact form here.
