In 1984, when my husband “the Pilot” and I were stationed in Washington, we opened our first investment account.  Since we started with only $3,000, we began our financial life as self-directed investors.  Over time we saved more, but mostly in my 401(k) where there were a limited number of investment options, so we remained self-directed.  Then, when I moved into the investment management industry, it was a point of pride to be self-directed.  Much like doing my own taxes (I’m also a CPA), I felt it was hard to be credible talking about investments and financial planning if I hired an advisor to take care of that part of my life for me. 

But for reasons of time and peace of mind, these days the Pilot and I are finally leaning toward hiring an advisor.  There’s a lot of speculation out there about what causes a self-directed investor to seek financial advice.  I thought it might be useful to hear one couple’s experience in considering that transition.

Let me be clear – we haven’t actually selected an advisor yet.  But as our nest egg grows and we start to think about retirement, there are a lot of questions that need answers.  For example, what will our spending needs be in retirement?  The dry cleaning bill will likely go down, but our travel expenses will likely go up.  And even if it’s easy to determine monthly expenses, how should we factor in the need for bigger purchases (e.g., new cars) down the road?  Once we figure that out, how do we determine what our savings should be?  What are the appropriate inflation and tax rates to use?  Then, even when we have figured out the number, there’s a whole other list of questions that we have.

For example, if I decide to join the Pilot in retirement before I’m 59 ½, do I just withdraw from my taxable savings?  Are there drawdown strategies or insurance products I should be considering? 

As you can tell, we could use some help.  But before we even get around to selecting an advisor, the Pilot and I have to make sure we’re on the same page when it comes to our broader financial goals, let alone what we think are the characteristics of a great advisor.  That’s my next blog post.