Questions about tax reform are on everyone’s minds recently, but there are even more important financial questions that you should be addressing.
Mitchell Barr, Client Associate
There’s a mistake many people make when approaching financial advice. They treat financial advisors like doctors, thinking the responsibility of the advisor is to diagnose a problem and then tell them what to do. The relationship with a doctor is exactly like this. You get sick, the doctor diagnoses your affliction, and then he or she gives you the proper treatment to restore your health.
It’s an easy question to ask a financial advisor what? you should do. However, what? is not the right question to ask your advisor. In reality, what? is a question you need to ask yourself.
What is it that I want to accomplish?
What are my goals and ambitions?
And in accordance with asking what?, why is it that you want whatever what? is. These are much tougher questions, and ones that an advisor cannot help you with. The best an advisor can do is be a sounding board for you while you contemplate your existence and the meaning of your life.
Once you answer what? and why?, then visit an advisor and ask how?
How can I put my children through college?
How can I retire early?
How can I exit the company I have built from the ground up over so many years?
The term “advisor” comes from the root “advice,” because that’s exactly what they can provide to help you reach your financial goals. Good advisors have the skills, experience and knowledge to answer these questions, and can add value in doing so competently.
Daniel Kahneman – a Nobel Prize winning psychologist notable for his work on decision-making and behavioral economics – calls this problem “substituting the hard question with an easy question.” It’s a default mechanism for your brain to reduce mental strain in this way. It’s much more difficult to answer the questions of what? and why?, so we are inclined to pass them onto someone else to answer for us.
If you really want to maximize the value that financial advice can provide, start asking how? and find a good advisor who is willing to listen. You don’t need to be financially ill for advice to work, you just need to have goals and someone to help you reach them.
Mitch writes the popular blog, The Money Monkey, where he focuses on common mental mistakes made by investors, how to avoid being your own worst financial enemy, and thinking about investing in new ways.