Financial Adviser vs DIY Investing: Which is Right for You?

Financial Adviser vs DIY Investing

Should you pay for professional advice or manage your own investments? The answer depends on your situation, knowledge, and preferences.

The Case for DIY Investing

Advantages

1. Lower costs - No adviser fees (typically 0.5-2% annually)
2. Full control - Make decisions on your timeline
3. Learning opportunity - Build financial knowledge
4. Simple options exist - Index funds, KiwiSaver require minimal expertise

DIY Works Well When You:

• Have straightforward finances
• Enjoy learning about investing
• Have time to manage your portfolio
• Can control emotions during market drops
• Are comfortable with technology

DIY Investment Options

OptionComplexityMinimumFeesKiwiSaverLow$00.3-1.2%Index funds (Simplicity, Kernel)Low$0-$1000.25-0.5%Sharesies/HatchMedium$10.5% + tradingDirect sharesHigh$500+Brokerage fees

The Case for Financial Advisers

Advantages

1. Expertise - Professional knowledge and experience
2. Objectivity - Not emotionally attached to your money
3. Time savings - They do the research
4. Comprehensive planning - Tax, insurance, estate planning
5. Behavioural coaching - Help you avoid costly mistakes

Advisers Add Value When You:

• Have complex finances (business, property, trusts)
• Face major life transitions
• Lack time or interest to manage investments
• Need help with multiple financial areas
• Want accountability and structure

Cost Comparison

DIY Costs

ComponentAnnual CostPlatform fees0-0.5%Fund fees0.3-1.0%Trading costs$0-$30/tradeTotal0.3-1.5%

Adviser Costs

Fee TypeTypical RangeInitial plan$1,000-$5,000Ongoing fees0.5-2% of assetsOR hourly rate$150-$400/hour

True Cost Example ($500,000 portfolio)

ApproachAnnual Cost10-Year CostDIY (low-cost)$2,000$20,000DIY (active)$5,000$50,000Adviser (1%)$5,000$50,000Adviser (1.5%)$7,500$75,000

The Value Question

Some industry research (such as Vanguard's "Adviser's Alpha" study) suggests advisers may add value through:

Source of ValueEstimated BenefitBehavioural coaching1-2%Tax efficiency0.5-1%Asset allocation0.5-1%Rebalancing0.2-0.5%Planning & strategyVariable

The catch: Not all advisers deliver this value. Quality matters enormously.

Hybrid Approach

Many people combine both:

1. DIY for simple investments

- KiwiSaver - Regular index fund investing - Savings accounts

1. Adviser for complex decisions

- Retirement planning - Major life events - Tax optimization - Insurance review

Decision Framework

Choose DIY If:

• Portfolio under $100,000
• Simple financial situation
• Interested in learning
• Disciplined investor
• Clear on your goals

Choose Adviser If:

• Portfolio over $500,000
• Complex situation (business, property)
• Approaching retirement
• Multiple financial needs
• Want someone to manage it

Choose Hybrid If:

• Growing wealth
• Occasional complex decisions
• Want periodic check-ins
• Budget-conscious but want guidance

Questions to Ask Yourself

1. Do I have time to manage my investments properly?
2. Can I stay calm during market crashes?
3. Do I understand tax implications of my decisions?
4. Am I confident in my investment knowledge?
5. What would a mistake cost me?

Getting Started

If you're unsure, consider:

1. Start with low-cost DIY options (KiwiSaver, index funds)
2. Track your results and comfort level
3. Get a one-off consultation for a financial plan
4. Reassess as your wealth grows

A good financial adviser should be able to demonstrate their value. If they can't explain how they'll help you, keep looking.