What hobbies or activities are you planning to take on in retirement?
Golf? Bridge? Iron-man events? Each sounds good for mind or body. Now for another activity that seems beneficial – managing your own investments.
A reader got in touch recently to ask about this. She and her partner are newly retired and interested in taking a more hands-on approach to their investments, which are currently looked after by an adviser. The adviser charges 1 per cent, which can add up to a significant amount for people who have built substantial retirement savings.
My suggestion: Don’t do it. Set up a small investing account on the side with an online broker to scratch that itch to manage your own investments. Leave your retirement account with the adviser, providing he or she is delivering good service and investment returns.
The argument for leaving retirement savings with a good adviser is partly about the aging process. Last year, I had an e-mail from an 80-year-old doctor who was a lifetime DIY investor. He said he was starting to worry about his ability to manage his investments going forward. Fearing he’d make an investing mistake with his portfolio, he was open to turning his portfolio over to an adviser.
Ideally, taking on management of your own investments when you retire goes well for 10 or 20 years. Then, what? Finding an adviser at any age can be an exhausting process of seeking recommendations from friends and family, having initial conversations and then interviewing prospective candidates.
The reader who asked about self-directed investing was interested in learning more about investing, which is an excellent way to spend time in retirement. The adviser-client relationship works best when there’s a common understanding about the markets, risk, diversification and so on.
But there’s a big difference between learning about investing and managing a portfolio of investments that is relied upon for retirement income, covering big expenses and possibly leaving a legacy for family. Everyone, pros and amateurs alike, make mistakes when investing. The difference is in the mistakes themselves – are they small and fixable, or disastrous in causing long-term damage?
An ideal way to learn about investing in retirement is to open a self-directed tax-free savings account at an online broker. Start fresh with the current year rather than transferring your existing TFSA money, and see how it goes.
— Rob Carrick, personal finance columnist
