When Should You Hand Over the Keys — to Your Investments?

Someone holds an old key in front of the camera. — (Image credit: Getty Images)

Saving money for retirement is not always an easy feat. But it may be a point of pride that you’re not only someone who consistently saves a portion of your paycheck, but also oversees your own investments.

There may, however, come a point when you’re no longer equipped to manage your portfolio yourself. It's possible that it’s growing in size and you’re feeling overwhelmed. Or maybe you’re nearing retirement and are worried you’ll be overzealous as far as withdrawals are concerned. Finally, you may be anxious about who will manage your investments if you were to become suddenly ill.

Handing over the keys to your investments requires a significant mental shift. It’s important to know when to do it, and how to find the right person to oversee the wealth you’ve accumulated.

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Getting the timing right

There’s no hard and fast rule about when to hire a portfolio manager versus continuing to manage your investments on your own.

Doug Ornstein, wealth management director at TIAA, says many people decide to hand over the keys to their investments a few years before retirement because "they start to see the reality of needing to replace their paycheck when they stop working."

But some people, says Ornstein, are tasked with juggling multiple retirement plans and dozens of investments. And many near-retirees find that deciding how to cash out assets is not as simple as accumulating them.

Jordan Mangaliman, owner and founder of GoldLine Financial Services, says it's never too early to work with a fiduciary portfolio manager because they can offer investment guidance that can be critical to your retirement success. But the five-year mark before retirement is a crucial time to start working with a portfolio manager, he says.

"The closer you get to retirement, the more you must start to manage volatility. If your portfolio is unbalanced or does not reflect your risk tolerance, it can completely throw off your retirement date," Mangaliman says.

Ornstein says that if you're on the fence about hiring a portfolio manager, be honest about whether you really have the time to give your investments the attention they deserve. And also, make sure you're confident in your knowledge.

"This isn’t just reading the newspapers and searching for news on the internet about your investments," he says. Rather, you need a high level of understanding of things like equities versus fixed income, asset allocation, and more.

It's also a matter of whether you actually enjoy managing your portfolio. If there are other things you'd rather be doing with your time, Ornstein says, then that's reason enough to outsource the work.

When you may need to shift gears

There are certain life circumstances or changes that may drive you to hire a portfolio manager. If you’re newly married or divorced, you’re in a new financial situation. It could help to have someone step in and adjust your portfolio as necessary.

Similarly, if you’ve recently inherited a large sum of money, it’s a good idea to get help managing it. A portfolio manager may also be able to help you minimize an associated tax bill, if that applies to you.

Meanwhile, if you or a spouse has been diagnosed with a serious or terminal illness, it changes your financial plan. A professional can help you adjust accordingly. Plus, if you’re grappling with an illness, you may not have the mental or physical ability to manage your own money. It pays to take that task off your plate while you focus on your health.

Even if you seem healthy, you may want to lean on others as you age. For example, people with dementia may start mismanaging money years before their diagnosis, and they may be unaware of their limitations.

It could also pay to hire a portfolio manager when you realize your net worth has grown more than expected in a short period. This could be a result of a specific asset of yours, such as a home gaining value quickly, or a business of yours being acquired.

Consider also adjusting your personal schedule. Maybe you’re a new parent who’s juggling work and sleepless nights with a newborn. That’s as good a time as any to find some help.

Or maybe you’ve gotten a promotion and are working longer hours. Hiring a portfolio manager could help ensure that your investments aren’t neglected.

Finding the right portfolio manager or financial planner

Transitioning to a portfolio manager or financial adviser can be both liberating and sobering. You might feel relief to have a professional in your corner, but part of you might feel hesitant about handing over the reins.

One thing to keep in mind is that hiring a portfolio manager doesn’t mean you’re suddenly not allowed to make decisions about your investments. Rather, it’s that you’ll have the guidance of a professional to ground you and help you avoid potential hiccups that could be detrimental to your retirement security.

Ornstein says it's important to ask any portfolio manager you talk to about the strategies they use to maintain long-term asset allocation models and keep clients invested through market volatility and cycles.

Prolonged stock market downturns could happen repeatedly in the course of your retirement. It's important to have someone in your corner with a real plan for getting through them.

It's also important, Ornstein says, to ask about cost. Portfolio managers have to get paid, but you need someone whose fees you're comfortable with.

Mangaliman says it's especially important to determine if your portfolio manager is paid by fees or commissions. That way, "you have a clear understanding if the advisor is client-goal driven or sales driven," he explains.

Also, Mangaliman says, aim to work with a portfolio manager whose experience aligns with your circumstances. If you're a person with moderate wealth, you may not want to hire someone who primarily oversees the portfolios of ultra-high-net-worth individuals. And on the flipside, if your portfolio balance is quite large, you shouldn't hesitate to seek out a portfolio manager with experience working with that level of wealth.

The one thing you don’t want to do, says Ornstein, is let things reach the point when you no longer have a handle on your portfolio and you’re making decisions from a place of stress instead of a place of knowledge and confidence. And if you find that you’ve been neglecting your portfolio, whether due to being overwhelmed or busy in life, it’s time to be proactive.

“The best time to hand over the keys is before you’ve realized you need to hand over the keys,” he insists.

Maurie Backman is a freelance contributor to Kiplinger. She has over a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. She has written for USA Today, U.S. News & World Report, and Bankrate. She studied creative writing and finance at Binghamton University and merged the two disciplines to help empower consumers to make smart financial planning decisions.