As is typical with human behavior, we have all been tempted by the allure of the “Best Stocks to Own Now” or “This Year’s Top Performing Funds.” Let’s face it – we all enjoy the sirens call of the next new thing – or perhaps we refer to it as FOMO – the fear of missing out. These headlines capture our attention. They are designed to attract the attention of our natural behavior. In this same way, certain “financial advisors” may use similar techniques to tell you that they have “a strategy to limit your losses and capture more of your gains,” “the best portfolio now,” or perhaps even the word we all love to hear, they have a “guaranteed income.”
Let’s face it, this is just marketing to appeal to our more fundamental nature; designed to trigger that initial fight or flight response – You’re thinking, I have to have this now, it’s what I’ve been looking for, or this will certainly solve my problems. Rarely do the next best thing or products, in general, truly solve our problems. Financial products can be much like putting a bandage on a wound that has far more internal damage; the dressing may slow the bleeding and give the appearance of healing, but it does not correctly address or fix the problem – there may be a more profound concern or issue.
When you start to think about your money, stop. You should first begin to think about what you really want out of life and then think about how your money will support you. In this framework, you have the best opportunity to begin to get your money working for you rather than the other way around. It’s important to start with a serious look at where you are, who you are, and where you want to go. Once you have given this serious thought, you can then start to piece together the next steps of how to put your money to work for you in the best way possible to support you.
While this sounds easy, for some it may be more difficult, and you may want to seek out some help. If this is the case, how do you know where you can go so that you won’t be sold a product or some other type of service that you don’t need. Instinctively, if we are only listening to that inner voice in our head that says – this guy is nice – oh, wait, this product doesn’t sound right – it seems expensive or restrictive, but this is a nice guy…that’s the time that you should stop and reevaluate your direction. Conversations about what might be best for you starts with just that – a discussion about what might be best for you – devoid of any mention of products or portfolios.
How do you find this person? Well, you can go one of 2 ways – work with someone who sells products or work with someone who provides advice. How do you know when everyone is calling themselves a financial planner or financial advisor these days? Well, generally, if that planner or advisor will not receive any compensation from the implementation of a product or portfolio other than what you are paying the advisor directly, you are off to a good start. Watch out for an advisor who will have you pay them a fee and then receive compensation from a third party for the implementation of a product. This recommendation may still be in your best interest, but it clearly is in your best interest if there is not third-party compensation. Trust your instincts. Do not rationalize your relationship with an advisor if you sense there is a conflict. Look for conflict-free advice.
My core values have always centered on integrity and trust. I prefer to provide sensible advice and clear solutions. In that process, I also want to be clear that any advice I offer is in the best interest of my client and not mine. That’s why my firm is a “fee-only” firm. Fee-only advisors do not receive commissions for selling financial products or any other inducement from third parties. All compensation is earned through an agreement based on the value provided to a client and paid by the client on an hourly, fixed fee, or percentage of assets basis. Clients either pay me directly or see my fees as a line item on their investment statements.