“Deciding what not to do is as important as deciding what to do.”
― Steve Jobs
The Value of Specialization
When I turned 16 and got my first car (yes, it’s been a few years) my older brother taught me how to change the oil. I continued this for a couple years or so and then started to delegate the job to the local oil-lube station. Even though it was more costly, it was worth it because my time was becoming more and more valuable at that point. It’s one of the first things I can remember that I had done myself at one point and then decided to pay someone else to do.
I’ve also built three different homes throughout my life. Yes, it’s a lot of work and no you won’t save much unless you have an edge, like owning a hardware store or providing the labor yourself. For the most part, I contracted or delegated the entire job. As the general contractor, you spend most of your time planning, finding competent subcontractors, sending out and receiving bids and coordinating the build process with the subs you eventually select.
The subcontractors included excavators, foundation and concrete specialists, carpenters, electricians, plumbers, insulation specialists, painters, roofers, landscapers, etc… Had I elected to take the time to learn to do each part of the build myself, it’s likely it wouldn’t have been done to code, wouldn’t have looked as sharp as someone who spent their lives specializing in each trade, or I would still be working on the first home. The time-cost and learning curve would have been substantially more than it already was.
Delegating to Professionals
We all reach the point to delegate certain things and we all reach it at different points in our lives. Some elect to manage their finances themselves. And though some will do fine, for the most part, many do-it-yourselfers will end up paying more taxes than they could or should have (particularly when retired or close to it) or they will end up being in and out of the markets at the wrong time.
Hundreds of thousands of years of human instinct and the fight or flight mentality overcome even the sharpest investors at times causing self-inflicted wounds. This article highlights a study from DALBAR that shows U.S. Investors Lost Twice As Much As The S&P 500 In 2018 and another here from 2016 showing the average investor hasn’t even done as well as a one-year US Treasury over the last 30 years and fell far short of the returns of the S&P 500 and the global IFA index.
In our financial lives, often small decisions compounded over time can exponentially affect the outcomes of the goals we have. For instance, with my liquidity event in 2018 (selling Tim’s Ace Hardware), I’ve personally made some moves that should allow me to have, literally millions of dollars more in after-tax money over my lifetime. And the changes I’ve made probably aren’t as large as you might think.
Often, do-it-yourselfers simply don’t know what they don’t know. It’s like knowing the construction codes. You may think you know how to eclectically wire a house, but do you know which breakers need to be used and where, what type of wire is needed and where, what needs to be grounded and where? In the time I hired subcontractors to help build our family homes, these codes changed substantially and that was only over the course of one decade. Likewise, it’s exceedingly difficult to keep up with the myriad of changes that affect your financial future. For instance, with the 2018 tax-law changes, do you know how you can build a plan to avoid paying more taxes than you need to?
I understand this article is obviously self-serving, but the numbers don’t lie, and it is my strong belief that everyone should have/use a financial advisor. The value of an objective third-party that can bring up strategies and processes possibly not considered previously and having another professional on your personal team to help keep you accountable to your own goals, simply should not be dismissed when it comes to financial matters. Curving behavior by educating and informing clients is one of the largest value-adds a good advisor can provide.
If you are considering reaching out for assistance with your financial situation, you will need someone competent you can trust, as it is likely one of the most important decisions in your life. By delegating your finances to a trusted professional you not only get more time on your hands but you can relax knowing that your personal finances are managed appropriately.
If you have done a decent job managing your finances to this point but have some questions moving forward, take a look at our no-obligation process and see if it makes sense to you.