A colleague who wants to work with more retirees asked me how I would handle a question he recently got from a hard-charging, do-it-yourselfer.

“How do I know I’ll do better with you than I am doing on my own?” asked the prospect.

Recently, a few new studies have quantified the benefits of working with a financial planner. According to the paper Alpha, Beta, and Now ... Gamma by David Blanchett and Paul Kaplan of Morningstar, an additional 29% of retirement income, the equivalent of an additional 1.82% a year in return, may be realized by using some specific planning strategies, like employing a dynamic withdrawal methodology or a tax-efficient asset location. In the February issue of the Journal of Financial Planning, brain wave research showed that people are less freaked out in stressful market conditions when working with a CFP licensee. 

And many studies over the years have shown that do-it-yourselfers get inferior investment results in the aggregate. I welcome the studies, but for this case, I don’t think they address the issue.

Imagine this: A couple named Archie and Edith are meeting with me to see if they want to hire our firm. Archie runs the money in this household. He knows the markets. First thing in the morning, he takes a peek at the futures on CNBC. In the evening, he watches some cable news. It is important to him that he is informed. He has always handled the investments for his family, and since he has retired, that role has taken on more significance; if something gets fouled up, he isn’t going to be able to re-enter the workforce to make up for it. 

Recently, however, few of his choices have panned out and he is becoming frustrated. Still, he recalls his most profitable choices readily and is sure he is just in a slump. Archie has come to see us only because Edith made him come in. He is not happy about it.

Edith, on the other hand, is smiling and seems excited as she settles into her chair for the conversation. She has researched financial planners thoroughly and come to believe that ours might be the firm for them. She loves that we are paid only by clients and never become salespeople for any financial products. She loves that we are first and foremost financial planners who want to collaborate on strategy with them before we make any changes. She loves that we will construct and manage a portfolio conservatively and collaborate on necessary strategic shifts. She found our credentials impressive and is confident that we are actually experts at guiding people to and through retirement.

But eventually, Archie turns the conversation to the portfolio. Now Edith is suffering. It is clear that his goal is to show her that he is at least as smart as I am. He is a little adversarial. By the time he asks, “What is your track record?” it is all I can do not to say aloud, “Well, it’s a heck of a lot better than yours.” That answer never has a good effect, even if it is true.

I don’t mind due-diligence questions. Heck, I want prospective clients to do a thorough investigation of everything on everyone they are considering. We have a terrific setup and stand out in a sea of people with lousy products and poorly conceived strategies. Our process is thorough and focused on each family’s uniqueness. And we are adept at helping them process a deluge of information about the chaotic economic, political and market environments.

Nonetheless, I don’t fire back at Archie. The look on Edith’s face compels me not to. Nonverbally, she is begging me to get him away from the money and save her. If I jab back, I will be effectively writing them off.
To be sure, Archie and Edith are stereotypes and may even seem to be clichés to some degree. But just about every financial planner has had a first meeting with prospective clients like these. Still, many times, such couples are among my favorite clients. They know I have a great deal of respect for them—after all, some Archies really are quite knowledgeable. If they can still become clients after being so defensive, that means they have the ability to shift their thinking. They might start to realize how they can derive value from sources other than pure financial measurements.

Still, I believe their investments will do better with us than them, especially when risk and taxes are accounted for. I have 23 years of experience. In my interactions with clients and peers, I have seen people make countless investment decisions. It has always fascinated me that gung ho do-it-yourselfers armed with due diligence checklists never seem to realize that if they compared their credentials with those of any decent financial advisor, they would never hire themselves.

What I think of Archie’s portfolio management is immaterial. But when he asks, “Will I do better with you than I would by myself?” he is missing the bigger picture. If he had an auditable record, we could compare past results. But the chance of him having the right data over a long enough period of time is nil. The issue is not who is smarter. I live in the shadow of the space center. This area is loaded with rocket scientists, and I am often the dumbest in the room. The issue is what life will be like for Archie and Edith in the future. They are on a path toward more stress.

Somewhere in his mind, every Archie knows things change when he retires. His likely fear is that when he gave up his job, he lost his relevance. So if he isn’t the money man, what is his role? Maybe he senses he is not as sharp as he once was. Maybe he just doesn’t find financial matters as interesting as he once did or has otherwise lost energy for it. Those cable shows can be draining, you know. His health may be suffering and he could be worrying about Edith’s future without him.

Part of him is likely looking for a way to make a change. He doesn’t want to admit that it is getting too hard for him, though, nor give up control because his wife fears he’ll make a mistake. But if you can offer him an alternative rationale, he may be able to do what he knows he should do.

A simple way to do this is to reframe the issue of value. Ask the couple to imagine identical twins, Bob and Bill, who have each made the exact same return over a given time frame. Neither one of them has “won.” Then ask, “What if Bob put in time and energy toward finances but Bill put in none and they still got the same result? Now who would you say won?”

The discussion that follows will be enlightening. It could be Archie values his time and energy and would prefer to spend it on other things besides finances. He may realize Edith wants more of his attention as much as she wants solid financials. There is a cost to doing things yourself, and sometimes people like Archie realize it is a high price. (If you frame it the right way.)

The couple should list things in life that are most important to them. They will come up with several things besides money. Then you should ask them how much better their lives would be if they could redirect their time and energy toward their health or their relationship with each other, their families, friends, their community, their causes or God? How many of those things could they delegate? None. Money matters, on the other hand, can be delegated. And portfolio management is one of the easiest to hire out.

If they realized the high price of DIY, Archie would no longer need you to beat him at some imaginary, beside-the-point investing game. He partners with you to help him keep control of his life. Your likely outperformance is a nice bonus. Hiring you is no longer a threat to his relevance or his manhood; it is a prudent, smart, empowering, liberating choice that has tremendous value even if the value cannot be precisely quantified.

Dan Moisand, CFP, has been featured as one of America’s top independent financial advisors by most leading financial advisor publications. He has spoken to advisor groups on five continents on topics such as managing investments and navigating tax complexities for retirees, retirement readiness and topics relating to the development of the financial planning profession. He practices in Melbourne, Fla. You can reach him at (321)253-5400 or dan@moisandfitzgerald.com.