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Reducing financial chaos for self-directed investors

Lauren Wilson - January 24, 2019 - 0 comments

Reducing financial chaos for self-directed investors

Self-directed investors are looking to reach the highest return with the lowest amount risk. Sounds simple; however, different personal reactions to gains and loses can introduce emotions and other biases which impacts accurate risk evaluation and introduces an element of chaos. It doesn’t need to be that way.

Warren Buffett said, “There seems to be some perverse human characteristic that likes to make easy things difficult.”

Self-directed investing doesn’t need to be chaotic or difficult, but it does take careful consideration to keep it simple.

Here are three areas banks and credit unions can support self-directed investors:

Build core skills

“Risk comes from not knowing what you are doing.”  Warren Buffett

To be successful, self-directed investors need to build a core base of skills, both technical and soft. A technical base of investing basics including how markets work, diversification and investment mix, data and risk analysis, and financial instruments are fundamental. Soft skills ranging from patience, decisiveness, and dedication, to critical thinking are an equally important complement.

The great news is that each of these skills can be strengthened. First, potential investors need to be able to identify their own strengths, weaknesses, and biases.

Banks and credit unions can provide support by offering a wide range of educational material to boost investing skills, at their own pace. Online education in the form of courses, FAQs, and expert created content can be recommended through simple self-assessments. Webinars and live ‘ask-an-expert’ sessions can accompany this and offer opportunities for financial institutions to actively engage with clients.

Other skills self-directed investing clients will need to be successful include understanding how to use an institution’s investment platform. Ensuring it is simple and intuitive to use, with accessible support will ensure self-investors dedicate time into developing their own skills, rather than trying to navigate a trading platform.

Develop a systematic plan

“If past history was all that is needed to play the game of money, the richest people would be librarians.” Warren Buffett

Experts agree that successful investing starts with a plan. An investment plan should not only include an investment strategy aligned to reaching personal goals, but should also match the amount of time the investor has dedicated to building investing and their risk tolerance. Owning a portfolio of stocks and bonds takes more time than holding funds, and active trading demands many more hours than a buy-and-hold strategy.

Establishing a plan takes work, and sticking to it during challenging times can be even more difficult. Banks and credit unions can help by providing easy to use tools and frameworks to help investors determine their risk tolerance, understand reasonable rates of return, and evaluate their goals against their desired investment time horizon.  Opportunities to track investments in simulated environments can help investors test new strategies and build confidence in their decisions.

Financial institutions can look for ways to make their online self-directed trading platform an investors ‘strategy-central’. By building in areas for investors to outline their strategy and notes, trading platforms become an active part of the investment planning process. To assist those uncertain where to start, a set of guiding questions can direct potential investors to the right resources.  Additional functionality can be integrated to help investors manage their portfolio to their strategy. For example, enabling investors to set targets on investments which send notifications to flag them to re-evaluate investments. Similarly, automated reminders can be set annually, or customized to clients preferences, to initiate portfolio reviews and rebalancing.


“Never invest in a business you cannot understand.” – Warren Buffett

Making an investment plan and investment decisions requires research. In today’s digital world, investors have easy access to information. This can make it feel overwhelming. Wading through divergent opinions and evaluating the quality of the source of information can take up valuable time. While data on past performance is much easier to access, it is less relevant for future performance then reviewing a prospectus or annual report and evaluating it against your own strategy and portfolio.

Banks and credit unions can help self-directed investors by integrating trusted research sources, insights, and tools directly into their platform. Watchlist and investment tracking can populate an investment dashboard that is easy to understand and interact with. To offer flexibility to support beginner to expert investors, more advanced tools can be made available, on demand.

As we proceed through a wealth transfer which will find Generation X and Y holding around 70% of financial assets by 2030, it is expected to see a continued shift to self-directed investing. Attracting and retaining these generations, while building an engaging investing experience to attract Generation Z requires a creativity infused strategy. How is your financial institution managing the shift? We’d love to hear. Reach out to us at

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