Investors grapple with self-management versus hiring the portfolio manager.

My View:

Self-managing the family portfolio is best viewed and treated as a full time job.


Be sensible and realistic of all requirements to self-manage your family portfolio.

“My advice to investors who cannot give full time to a study of investments is to seek out some trusted investment counsellor. The emergence of this new profession of disinterested investment analysts, who have no allegiances and whose job is to judge a security on its merits, is one of the most constructive and healthy developments of the last century.” — Bernard Baruch (1870–1965) American financier

On first blush, taking the reins to self-manage the family portfolio seems like a sound proposition. Digging below the surface sheds light on perceived values and requirements. My recommendation is that managing the portfolio is best viewed and treated as a full time job. No matter who is in charge of the management processes.

Many investors receive good value from the investment professional. Desirable signs are the appreciative comments from clients and voluntary introductions to family, friends and colleagues. These are compliments to be treasured.

Realities of self-management
The decision to ‘do it yourself’ may be beneficial for some. However, it requires the manager to be brutally honest and realistic. Over the years, I have reviewed self-managed portfolios ranging from 3 to near 100 different investment selections. The majority fell short of the muster.

Taking the responsibility of piloting the family nest egg through the long investing journey is far from an easy task. A 40 year old could easily be at the wheel for the next 40 to 50 years. I salute the brave ones who have stepped up to the podium. It takes a lot of long term commitment.

If you have what it takes for the long journey—go for the gusto and take firm grip of the management helm. If you’re struggling to stay afloat in the deep end—find a qualified portfolio manager to steward your nest egg.

Some have fared well on this multi-year voyage. Others have taken on a much bigger task than they can handle, or ever imagined. Most investors also hold a full time job while stewarding the family nest egg. Be prepared for a tall and difficult assignment, even at the best of times.

Some self-managed investors engage specific one-time services of investment professionals. For example, the game plan is designed by the adviser, then implemented by the investor. My experience shows these arbitrary divisions are far from matches made in portfolio heaven. The number of successful outcomes arising from such an ad-hoc process is small.

There comes a day and time when investors decide that it is no longer feasible for them to continue self-management. All reasons aside, there will be need for a transition process to evaluate and appoint new portfolio managers. Hopefully, the transition unfolds smoothly.

Key management demands
I highlight key demands necessary to succeed at being your own wealth manager:

  • Start with plenty of time, confidence, patience, discipline, strategies and knowledge. Grasp a variety of best practices about retirement planning, managing risks, income tax, estate matters, family business issues, investment selections and economics. Formulate and draw upon your well-established investment philosophies to serve as the guiding lights. Craft solid foundations to fulfil the family’s long term goals and objectives.
  • Broad experience and personal drive is a must to design, tweak, implement, monitor and rebalance your portfolio. While at all times managing your nest egg rationally, logically, methodically and without emotional attachments. Prepare to guide the nest egg through different market cycles such as bullish, bearish and roller coasters. Be ready to encounter an array of different and changing economic cycles, such as inflation and slow growth.
  • You are able to dismiss the slew of daily distractions and put aside investing bias you may have. Make sense of the information overload that adds confusion at arriving at your portfolio decisions. Be fully conversant with investor profiles, asset allocation, asset location and asset mix. Research a wide number of investments and select the appropriate combination for the family.
  • Math skills stitch together various retirement projections and return calculations. You know how difficult it is to stay on top of everything financial that change daily. Sell those pesky, losing investments as soon as possible and without regrets. Integrate the financial planning and portfolio management requirements into one seamless process.
  • Take actions because they make investment sense, not only for tax reasons. Expect some things to fall through the cracks, even if you carefully craft the plan of action. Plan on living through stormy and prolonged investing periods. In the extreme, you may have to survive a “Black Swan” rough patch as in 2008 or another “Brexit” type event. Where do you take refuge when stock markets tumble 30% to 40%? Sell to stop the pain? Then what?

I suggest that your portfolio management toolbox be stocked with a wide assortment of useful tools. Prepare to revisit the value proposition to the family, such as your investment results. Be sensible and realistic about the requirements to self-manage your family portfolio. You will require an array of disciplined strategies to succeed.

Decision moment
You are now at the crossroads contemplating a very important family decision. One whose financial impact unfolds over years and decades. I recommend that you consider these questions very carefully:

  • Do you truly have sufficient time, knowledge, interest, competency and resolve to successfully steward your family’s long term finances through thick and thin? Or,
  • Is it better to hire a portfolio manager you’re comfortable with and delegate responsibility for stewarding your family nest egg?

You are being asked to make a detailed and brutally frank assessment of the value proposition you bring to the table. Be prepared to answer why the family should engage your talents. You know that professional managers are subjected to higher scrutiny.

Client Portfolio Considerations

Client Portfolio Considerations

Wrapping up
If you have what it takes for the long journey—go for the gusto and take firm grip of the management helm. If you’re struggling to stay afloat in the deep end—find a qualified portfolio manager to steward your nest egg.

Doing your own management is not for everyone. My experience is that the ‘do it yourself’ approach often lacks the sensible action plan. Further, self-management skills are not easily teachable. I respectfully submit that self-management is not something worth experimenting on the family’s retirement prospects.

My recommendation to investors is to tread carefully about self-management, unless you can honestly say that you have total competency to fulfill the arduous job. Perhaps, there is a happy medium that works well. That is, the portfolio management is shared between the investor and a professional manager. There is value in diversification of management talents. Just make the division of duties absolutely clear to both parties.

Of course, be aware of the various adviser designations. The highest classification is that of “discretionary portfolio manager”.

Not every adviser is equipped to deliver the comprehensive, ongoing portfolio practices highlighted in this blog. Some advisers may have an interest in what you buy and sell.

This exercise may also help you appreciate another main issue. That is, the continuing wide scope of the portfolio manager’s role and demands.

I highlight some key matters pertaining to my case:

  • I am one member of a team of three discretionary portfolio managers. There are no conflicts of interest in our approach.
  • I can call upon the other two portfolio managers anytime to vet ideas. That is an added value of the team approach.
  • I have backup when I am away from the office. Seamless continuity of service is important to clients.
  • I also have access to the resources of investment providers. That helps me determine the most effective client solutions.
  • I write about a variety of topics for posting on this blog. A number of them are quoted and reproduced in other media columns and segments.

My comprehensive wealth management service levies one fully transparent professional fee, deductible for taxable accounts. It covers ongoing advice in planning, designing, managing, monitoring and reporting for six family wealth components, as you require. Here is an overview:

  • Retirement planning and family business issues.
  • Risk management and long term investing.
  • Income tax implications and estate matters.

Be sure to consider all the important comparisons vis-à-vis your needs when assessing competing services. Your decision is about much more than the management fee. You have to determine how self-management will deliver consistent values to your family, perhaps for decades.

About Adrian Mastracci, Discretionary Portfolio Manager, B.E.E., MBA  My expertise in the investment and financial advisory profession began in 1972. I graduated with the Bachelor of Electrical Engineering from General Motors Institute in 1971. I then attended the University of British Columbia, graduating with the MBA in 1972. I have attained the “Discretionary Portfolio Manager” professional designation. I am committed to offering clients the highest standard of personal service by providing prompt, courteous and professional attention. My advice is objective, unbiased and without conflicts of interest. I’m part of a team that delivers comprehensive services and best value in managing client wealth.