In today’s digital age, there’s an increasing number of Canadians who choose do-it-yourself investing. Online brokerages and low-cost trading platforms allowed for a new style of investing to emerge. A new generation of DIY investors have seen a shift in the industry. Well, self management can offer Canadians a feeling of control, it also comes with significant and often underestimated risks. When planning retirement, these risks can become very concerning.
We believe that to truly safeguard your long-term financial well-being, Canadian investors must look beyond short-term control and recognize the value of a financial planner – particularly with retirement planning.
Do-it-yourself investing. Is it better?
Many Canadian DIY investors take pride in being able to manage their portfolios, believing that lower account costs and direct control mean better results. However, in practice, they may overlook crucial risk factors:
- Making decisions based on emotion,
- lack of diversification in portfolio,
- and a failure to adapt asset allocation to the complex and ever evolving economy.
Volatile markets, like the one we are navigating right now with a low Canadian dollar and the U.S. trade war, mean that emotional decisions can often override long-term planning strategy. With rising interest rates, inflation, policy shifts, and geopolitical tensions, this environment demands experience and foresight that many DIY investors don’t have.
In fact, we get many requests from Canadians asking us to look at what they’ve built themselves. But our advice is always the same. Without the disciplined approach from an independent financial planner, it’s too easy to misstep, particularly when managing a transition into retirement.
Relinquishing some control and partnering with a qualified financial planner is not a sign of weakness. It is a strategic decision to help ensure that your retirement years are not left to chance.
Can you save money managing your own investments?
Another common misconception among DIY investors is that self-management eliminates unnecessary fees. While it is true that products, like mutual funds and exchange-traded funds (ETFs) can offer market access at a relatively low-cost, there are still costs. Some are visible, some are hidden.
Mutual funds often carry management expense ratios (MERs) ranging from 1% to 2.5%. ETFs may offer MERs between 0.05% to 1.00% but they too also have hidden costs, like bid-ask spreads, foreign exchange charges, etc.
Unfortunately, though, the greatest cost of all: Missed opportunities. Without professional oversight, many DIY investors in Canada fail to structure their portfolios in a way that supports sustainability through retirement, tax planning and over the log term.
Independent financial planners can team up with portfolio managers to construct portfolios that are customized, cost-efficient, and work for pre and post retirement. They can tailor a strategyto an individual’s life stage, goals, and risk tolerance. It is not always about the fleeting market trends. The cost of hiring a financial planner, in many cases can be much lower than what the investors are already paying on their own. We’ve seen it first-hand.
DIY investors mistakes.
Wealth management by a professional planner goes far beyond picking investments. It encompasses a nuanced approach to planning that aligns assets directly with life goals, most critically, a strategy for retirement.
- Retirement planning: Canadian DIY investors focus often on saving but lack a strategy for converting assets into reliable income. Financial planners can help clients plan withdrawal schedules, integrate pensions and government benefits. And they can prepare clients to plan for both expected and unforeseen retirement expenses.
- Tax efficiency: Structuring your investments and withdrawals to minimize tax can add years to your retirement income. Strategies such as tax-loss harvesting, income splitting, and asset location are often overlooked by self-managed investors in Canada. For example, how are you using an RRSP versus a tax-free savings account (TFSA) versus non-registered accounts?
- Estate planning: You need more than a will. Working with professionals ensures you have beneficiary designations, trusts, and tax-efficient strategies – areas DIY investors often neglect.
- Continuity: In many cases one spouse acts alone as the DIY investor. When that spouse becomes ill or passes away the surviving spouse is left to fend for him/herself, often leaving them extremely vulnerable and highly stressed.
- Active management with timely rebalancing: A financial planner has knowledge and access to much more information than a DIY investor. With that, decisions can be made on a timely basis by a professional focused on your plan. The results can have significant impact on your investments.
Why you need a planner now.
With the current economy, the DIY approach could be precarious. Inflation continues to apply pressure on affordability and the cost of living, interest rates fluctuate, global uncertainty with wars and trading are all impacting markets. Even carefully crafted DIY plan can lack the adaptability to respond without emotions to these changing conditions.
Times like now mean expert advice goes from a luxury to a necessity. The financial planner is there at every step to re calibrate your strategy and ensure that you remain on track to reach your goals and give “peace of mind” even when markets do everything but cooperate.
Do you need a financial planner to plan for retirement?
Retirement is too important to leave it to guesswork.
Investing, though crucial, is just one part of the planning equation. A successful retirement plan requires coordination across taxes, portfolio design, income strategy, and estate and wealth transfer. Partnering with a planner that is aligned with you and your goals, one that succeeds when you succeed can be a game changer for that retirement that you always dreamed of.
If you’re a DIY investor feeling the weight of today’s stresses, it’s time to reassess. Relinquishing some control of your plan isn’t about giving up independence. Instead, it means gaining a professional you trust and who is committed to helping you actualize your vision for retirement.
It all starts with a No cost – No obligation call. We are here to Listen and Help.
