This article is reprinted with permission from Esq. Wealth Management, Inc.
Doing your own investing has never been easier. The tools are accessible, the fees are low, and the resources are endless. We’ve had clients come to EsqWealth after years of managing their own portfolios, often with modest results, until markets changed. While they were saving on advisory fees, they were paying a different kind of cost: missed opportunities, unnecessary taxes, and sleepless nights.
For investors who have built substantial wealth, those hidden costs can far exceed the value of working with a professional advisor to protect and grow their financial future.
1. Confidence Feels Easy in Good Times
When markets rise steadily, confidence in going it alone feels justified. Everyone seems like a savvy investor when the wind is at their back. But confidence built in calm waters is rarely tested until the storm hits.
Take March 2020. The S&P 500 fell more than 30 percent in just over a month as the world shut down. Many self-directed investors sold in panic, telling themselves they had to stop their losses and get back in when things stabilized. By the time they did, the market had already recovered more than half its losses. Missing just the first few months of the rebound cost some investors years of future returns.
The problem wasn’t intellect, it was emotion. Markets have always come back, but human confidence doesn’t rebound as quickly.
2. When You’re Your Own Advisor, Emotions Matter
No spreadsheet or app can measure fear, greed, or regret, yet those emotions drive many investment decisions. When you’re managing millions of dollars on your own, the psychological pressure can be immense.
We’ve seen this happen when fear resulted in missed opportunities and greed resulted in substantial losses. For example, consider an investor who was waiting for the market to correct and since late 2022 had $5 million in certificates of deposit and a checking account yielding between 2 and 4 percent. After paying taxes on interest each year, their after tax return was roughly 1.5 percent bringing the account’s value to about $5,228,400 after three years. During the same period, the S&P 500 returned approximately 87 percent. Had that $5 million been in a diversified portfolio which simply kept pace with the market, it would have grown to roughly $9,300,000, a missed opportunity of more than $4 million.
On the greed side, consider the 2021 frenzy around hot tech names like Zoom and Peloton. For a while, they looked unstoppable. Investors who piled in near their peaks saw those stocks lose roughly 70 to 80 percent over the next two years. The emotional whiplash from euphoria to anxiety to avoidance can paralyze decision making for years afterward.
Advisors earn their value not just by recommending investments, but by helping clients stay anchored when instincts pull in the wrong direction.
3. Technology Is Smart, But It Doesn’t Know You
Automation has made investing efficient, but it’s still impersonal. Algorithms can rebalance portfolios, harvest tax losses, and generate impressive reports, yet they cannot understand your goals, family dynamics, or tolerance for uncertainty.
Imagine a program shifting your portfolio into long-term bonds in early 2022—just before interest rates surged at the fastest pace in forty years. The algorithm executed flawlessly; it simply didn’t know you.
Technology is a useful tool, but it’s not a substitute for human judgment, context, and experience.
4. Mistakes Add Up Quietly
DIY investors often make small missteps that compound over time: overweighting a familiar stock, holding investments in the wrong type of account resulting in tax inefficiencies, or believing that “diversified” means owning dozens of funds that all charge management fees and hold the same companies.
Suppose someone owns multiple large-cap growth funds that each hold Apple, Microsoft, and Amazon. The portfolio looks broad on paper but moves in near lockstep with one sector. When that sector corrects, the entire portfolio does too.
Even small inefficiencies, like realizing gains prematurely or missing tax-loss harvesting opportunities, can cost hundreds of thousands of dollars over a lifetime.
5. The Cost of Not Having a Comprehensive Financial Plan
No one plans to fail financially, but many people fail to plan. No airplane takes off without a flight plan and no custom home is built without a set of well-prepared plans with structural designs. Similarly, at EsqWealth we believe that no family should embark on a 30- or 40-year financial journey, one that may extend across generations, without a comprehensive plan.
A true comprehensive financial plan goes far beyond picking a list of stocks and rebalancing the portfolio every year. The analysis should address all financial aspects of your life. For instance, you might be holding short term cash reserves in a checking account earning little or no interest, when those same funds could be invested in treasury bills generating a higher return with no state tax, potentially resulting in tens of thousands of dollars in additional income each year. Or you may own rental properties in your own name, when those properties could instead be held in a limited liability company to help shield your other assets from potential liability. Or perhaps you are a partner in a business that reports income directly under your name, when electing to hold your partnership interest through an S corporation could save tens of thousands of dollars in self-employment taxes. At EsqWealth, we help clients design and maintain comprehensive strategies that include the following:
- Cash Flow Management: Understanding income and expenses to create an intentional spending and savings plan aligned with long-term goals.
- Estate Planning: Reviewing existing structures to ensure assets are protected and estate strategies minimize taxes while preserving legacy.
- Tax Strategies: Developing proactive plans that reduce unnecessary taxation and enhance after-tax growth.
- Risk Management: Identifying vulnerabilities and creating strategies to limit the impact of unexpected or unwanted events.
- Investment Strategy: Evaluating each investment based on performance, risk, cost, and tax efficiency to align with your goals, risk tolerance, and timeline.
- Retirement Planning: Testing whether you are on track to achieve your goals, recommending adjustments to increase the probability of success, and identifying ways to protect your assets for your retirement.
Planning provides clarity and confidence. Without it, even substantial wealth can drift off course.
The Bottom Line
If you enjoy managing your investments, have a clear plan, and sleep well regardless of market swings, you may be just fine on your own. But even the most experienced investors benefit from a second perspective. A thoughtful review can reveal strategies, tax efficiencies, or planning opportunities that may not be apparent when you’re managing everything yourself.
Many of our clients at EsqWealth are exceptional at building businesses and creating wealth. But investing, preserving, and transferring that wealth requires a different skill set, one that blends judgment, tax awareness, and long-term coordination.
Controlling your own finances may feel good in the short term, but confidence, earned through experience, foresight, and a well-crafted plan, can lead to a stronger sense of security and a larger, more enduring financial legacy.
The information above is not intended to and should not be construed as specific advice or recommendations for any individual. The opinions voiced are for general information only and are not intended to provide, and should not be relied on for tax, legal, or accounting advice. To discuss specific recommendations for any unique situation, please feel free to contact us.
