Managing wealth can be challenging; many individuals mistakenly believe they can handle their finances independently. However, consulting a wealth management financial advisor can mitigate the risks of navigating wealth management without expert guidance, as these risks can be substantial. 

Partnering with wealth managers or financial advisors offers structured and professional insight that’s often crucial for maintaining and growing your wealth. Whether you’re a high-net-worth individual or just getting started, not having a well-designed financial plan or investment strategy can easily derail your financial future.

The Risks of Going It Alone

One major risk of managing your wealth without a professional is the lack of strategic financial planning. Financial advisors and wealth management firms cover essential services like tax planning, estate planning, and investment management. A recent study found that the average household working with a financial advisor receives 3% in added value. This alone demonstrates the tremendous advantage of having expert guidance.

Without professional insight, individuals may lack the expertise to make informed decisions about asset allocation, investment products, or taxes. Wealth managers help align investments with your risk tolerance and financial goals, minimizing the chances of taking on unnecessary risk or missing out on opportunities to maximize returns.

Missed Financial Opportunities

Another danger of managing wealth solo is missing out on long-term investment opportunities. Wealth managers provide a comprehensive approach to managing your financial life, from estate planning to investment management. Without expert input, you might miss opportunities to invest in new products or optimize your portfolio to better align with your financial goals.

For example, from 1995 through 2018, the average investor saw an annualized return of only 1.9%. During the same period, the annualized rate of return for bonds was 4.5%, the S&P 500 was 5.6%, and oil was 7%. These numbers illustrate how easy it is to miss out on investment opportunities when you lack expert guidance.  

Additionally, wealth managers help individuals nearing retirement or facing significant life events plan better for the future. Whether it’s saving for a child's college education or setting aside funds for a major purchase, having a professional’s insight can ensure that you’re making the best financial decisions possible.

The Complexity of Wealth Management

Managing wealth involves more than just choosing where to invest. It requires a deep understanding of investment strategy, taxes, legal issues, and market trends. Professional financial planners bring expertise that goes beyond what most individuals can manage themselves. They often hold advanced certifications, such as the Certified Financial Planner ( CFP®) or Chartered Financial Analyst (CFA) designations, giving them the knowledge to guide you through complex financial situations.

Without expert guidance, individuals might make emotional or poorly timed decisions in response to market changes. Wealth managers help maintain a balanced portfolio through thoughtful asset allocation, preventing costly mistakes during times of market volatility.

Tax and Legal Consequences

Another critical area where individuals often falter without expert guidance is tax planning. Mismanaging your tax obligations can lead to unnecessary losses. A recent Russell Investments study showed that, on average, investors are losing 1.74% to taxes each year. 

Wealth managers collaborate with Certified Public Accountants (CPAs) to ensure clients leverage tax-efficient strategies, reduce tax burdens, and keep more of their wealth intact. Without professional help, it’s easy to make costly tax errors that could have been avoided.

Estate planning is another essential part of wealth management that requires expert input. Wealth management firms often provide trust services, ensuring that your wealth is transferred to the next generation in the most tax-efficient and legally sound way. Without a solid estate plan, your family could face unnecessary legal battles or tax bills.

The Benefits of Expert Guidance

Working with a wealth management firm or financial advisor offers peace of mind. Not only can working with a financial advisor result in higher portfolio returns, but you could also save money on taxes, save time on researching investments, and experience greater confidence in your financial stability. Research shows that 75% of those who work with a financial advisor feel confident in achieving long-term financial stability. Only 47% of those who don’t work with a financial advisor feel as confident. 

High-net-worth individuals, in particular, feel more confident about their financial futures when they work with professionals. This level of security ensures that your current and future financial needs are addressed. To learn more about when it's time to find an advisor, read our guide "Making the Connection: When is the Right Time for a Financial Advisor."

The Aligned Perspective: Wealth Management

Managing your own wealth may seem easy or appealing, but it comes with hidden dangers. From poor investment strategies to missed tax-saving opportunities, going without expert advice can negatively impact your financial health. Working with a financial advisor or certified financial planner can help you avoid these pitfalls, ensuring your wealth grows steadily and your financial goals are met.

Don’t risk your financial future—partner with a wealth management firm or wealth manager to protect and grow your wealth today.