Foregoing a Financial Advisor, Even the Wealthy Risk Common Investment Blunders

More Ultra High Net Worth investors are keeping their own counsel when it comes to investing, according to a wealth level study conducted by Millionaire Corner of households with a net worth between $5 million and $24.9 million (not including primary residence). Twenty-seven percent identify themselves as self-directed investors, up from 21 percent in 2010.

The percentage of those who consider themselves advisor-assisted, meaning they regularly consult with an advisor but ultimately make most of their final investment decisions, has declined from 34 percent in 2010 to 23 percent last year, while those who consult with an advisor only for a specific need, such as retirement planning or asset allocation advice, rose slightly from 24 percent in 2010 to 27 percent.

This wealth segment puts a high premium on their investment ability. Eighty-one percent say it is one of the three primary factors in achieving their success (36 percent credit decisions made by a financial advisor). In comparison, 66 percent of affluent households with a net worth between $100,000 and $1 million credit their investment moves in obtaining their wealth.

Across all wealth segments, the prolonged economic downturn cannot have helped but dampen enthusiasm for investing, but the Ultra High Net Worth remain more gung ho than those with less wealth. Fifty-four percent said they enjoy investing and do not want to give it up, compared to 35 percent of the Mass Affluent households and 45 percent of Millionaires with a net worth between $1 million and $4.9 million.

But for every investor, no matter how seasoned or successful, there are perils to going it alone and not seeking advice from a financial advisor. Among the most common errors investors make include:

∙Not conducting comprehensive research

∙Not understanding tax consequences

∙Not employing different investment strategies to achieve unique financial goals, such as saving for college and retirement

∙Not conducting proper portfolio rebalancing

∙Relying on an investment’s past performance which is not an indication of future results

With a clear understanding of your risk tolerance, a certified and trained professional can help establish a financial plan and ensure you stick to it. They can serve as the reassuring and authoritative voice that helps to reign in emotions that can cloud judgment during times of stock market volatility. And while the most hardened self-directed investor think they can do a better job themselves, a professional charged with monitoring your investments provides a useful support.