​Is It OK to Pay for Professional Help?

By Brad Thomason, CPA
 
 
Human nature seems to be to conflate where possible to make things simple.  Problem is, conflation often cuts out important information.
 
I had a conversation with a guy one time, who had read a good bit of my stuff, and he said, “So basically, you’re anti investment advisor.”
 
Not exactly.
 
I explained to him that there were situations in which I thought using a pro – be it a registered investment advisor, trust/entity lawyer, tax strategist, business consultant, whatever – made sense, and situations where it didn’t.  I also pointed out, sensible or not, there was going to be a cost, which had to be an upfront consideration in assessing the question.  It’s really never a good idea to make a decision about doing or not doing much of anything in which the cost is not weighed; much less cases where it doesn’t even seem to be consciously acknowledged that a cost exists in the first place.
 
The root of his conclusion, I suspect, was predicated on my oft-repeated position that people should take an active role in planning and executing their own retirement income campaign.  I am not a fan of dumping everything in a professional’s lap, a la here, you take care of it.  I also do not think a lot of those interactions in which the client meekly gives a shoulder shrug and says, ‘I just do whatever he tells me to.’ 
 
But that has more to do with capitulation of sovereignty/responsibility, a common path to suboptimal outcomes.  Not the mere presence of the fee-charging professional.
 
Here’s perhaps a simple way to understand it.  College endowments hire outside investment managers all the time.  When they want to deploy some capital in the direction of a particular market or asset class, they seek a presumed expert in that arena, grant them a portion of capital to oversee, and send them off to get the returns.   
 
If that sounds like hiring someone to do a job, then a did a good job of describing it.  Because that’s exactly what’s going on.  The fact that the endowment wants access to the person’s knowledge and abilities in no way clouds the picture as to who is in charge.  The endowment seeks to receive benefits (in excess of the cost, by the way), but they are benefits which were identified by the endowment as part of a strategy that the endowment managers (not the hired gun) established, and it is utterly clear at every level where the sovereignty lies.  The sub-manager knows that there will be accountability, perhaps rigorously measured and enforced, and that the funding for the whole allocation can be pulled if the performance is not there.  The only aspect of dependency is that the manager is depending on the owner of the capital for payment of fees on services rendered.  That’s it.  No dependency flowing the other way.  No notion that the endowment would be at a loss for what to do if the pro vanished into thin air.
 
That strikes me as a good use of professional help.
 
Things go differently in the private realm, of course, since you don’t have your own staff to run this stuff like the endowment does.  But the basic premise holds.  Directing activities is not the same thing as being someone’s ward; and the difference between the two is a big enough difference to make…well, a big difference.
 
Another thing that I have said many times, in many different ways, is that once you have all you think you are going to need, you need to reallocate your holdings to reduce your risk exposure.  One of the most straight-forward ways do that, functionally speaking, is through products offered by insurance companies.
 
Buying insurance, be it a policy for specific coverage, or using an annuity as a means to interest or lifetime income, is an act in transferring risk.  We all implicitly know that, I think.  But transferring it to whom?  Why, the pros in the employ of the insurance company. 
 
Think about it: to remain able to deliver on promises made (a legal requirement, monitored closely each year by the insurance departments of all of the states in which the insurer operates) they have to have people on staff charged with managing the assets.  That is to say, doing the job of making sure returns come about, so that you don’t have to.
 
Anyway, it really comes down to this.  Managing money requires someone being present to do it.  If that someone isn’t going to be you, it still needs to be done.  So now it’s a conversation about hiring a professional.  Just understand that having that conversation as a person engaged in directing is very different than having it as a person focused solely on being a spectator or being cared for.  Beyond that, there will be some sort of cost, which necessarily needs to be less than the benefits received.
 
But yea, if you’ve thought about those things, have a sense of how you will benefit in excess of what it is going to cost, and can afford it, using a pro can be perfectly reasonable.  Though take note that those are some pretty substantial pre-conditions; and without them then the answer to the question is not the same.