There is a flawed argument called argument from ignorance.

“Absence proves the point.”

There is no evidence that some event has occurred, therefore said event cannot occur. The more reasonable argument is “absence of evidence is not evidence of absence.”  Relying on this flawed argument idea impacts a good deal of flawed financial planning.

The pricing falsity – Absence of investment fees increases yield

  1. Absence of investment fees only matter if other costs do not appear in their place.
  2. Is it possible that someone who has completed the Chartered Financial Analysts course and has 10 years experience, might be better than you at portfolio design and management?
  3. Would an advisor who understands your goals, resources and abilities be able to help you improve your financial skills?
  4. Would an advisor motivate you to save more, save sooner, and leave your savings alone to grow, better than you might do by yourself. Saving even a little more has a huge effect over the long time to retirement.
  5. Would advisors and managers with access to markets be able to find and implement products you can neither see nor access.
  6. Would an advisor keep you from making a crucial mistake that is easily avoidable. Private equity deals, mistyped investment instructions, and emotional responses to market conditions can cost significant money.

Do you want higher apparent yield or more money?

This is much like a golf condition. “They don’t ask you how, they ask you how many.” A shot that hits a tree behind the green bounces back, runs through a bunker and ends up in the hole counts one.

When it comes to educate the children or to retire, how the money came to be will be unimportant. The quantity will be the only thing that matters.

Yield is a dysfunctional metric.

Yield only matters when there are no other variables that impact the real goal. In the case of personal financial management there are many other variables. The most insidious of them are emotional response to adversity, and self-discipline. While not impossible to self manage, it is extremely difficult to do so.

Buying solutions to difficult problems is cheaper

We have personal trainers because we lack discipline, technique, and motivation. We use dentists and surgeons because special knowledge and skills help us. We hire decorators to help with problems we seldom address.

Do it yourself is a trap. We do not gain enough experience or knowledge in areas that we meet only a few times. Would you do your own title search when you buy a house? Would doing your own will make sense if you have anything more than the simplest estate? Do you do your own tax return?

Before you do it yourself, address the complexity of the situation. Can it sometimes be complicated? Do you care about the outcome? If Yes and Yes, do-it yourself is not the smartest choice.

Cheap can be expensive

Price is a poor indicator of value. Before you decide to replace some expense, consider what other costs you accept by doing so. Some are hard to see and some you don’t know about. Many times people who understand the rest of the problem, choose to pay to avoid it.

As to do it yourself, “Thank you, but I cannot afford anything that cheap.”

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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