Could the young but realize how soon they will become mere walking bundles of habits, they would give more heed to their conduct while in the plastic state. We are spinning our own fates, good or evil, and never to be undone. Every smallest stroke of virtue or of vice leaves its never so little scar.
William James
If you have ever tried to get back into shape after a few months on the couch, then you know that changing your behavior or habits can be extremely difficult. It’s uncomfortable, frustrating, and often not a linear path to success. I don’t quite agree with William James on the “never to be undone” part, but it’s not easy to change our habits.
And this struggle extends to our financial habits. All of us were raised with a certain set of lessons about how to approach our finances. During childhood we took money cues from both friends and family. Over time, these cues became ingrained habits. And for good or ill, these habits can have a monumental effect on our financial well being later in life.
There is hope
However, there are some things we can do to help when it comes to changing habits. For example, if you want to get in better shape, you might start by talking to your doctor to make sure you don’t have an underlying medical condition. Next, you might visit a nutrition expert to get your blood tested and get a baseline nutrition plan. Finally, you might hire a personal trainer to help create a plan for the next 90 days.
All of these “advisors” can provide expert knowledge and insight. They can also provide accountability and emotional support as you go through the process. Most importantly however, they can help you develop a plan to achieve durable results.
This is analogous to what a financial planner or advisor can do to help improve your financial habits. Whether you are worth $0 or $10,000,000, it’s likely that some component of your financial house is not in order. And that is the true promise of a high-quality financial planner. They can help you put your financial house in order and build a durable framework to keep it that way.
The core question when working with a financial planner should not be, “How much will my investments earn?” Rather, the focus should be on, “How can this person help me increase my confidence around my financial situation?” The underlying reality of investing these days is that almost anyone can create a high-quality investment portfolio at close-to-zero cost. So your financial advisor won’t add a mind blowing amount of value around the construction of your investment portfolio.
However, it’s more difficult to handle the emotional ups and downs that come from market declines or life changes. A financial advisor can help you stick with your investment plan, even in the face of gut churning market movements.
Don’t focus only on investments
Your financial advisor should be willing to help you in almost any area of your life that pertains to your money and finances. And that’s the issue with many advisors who charge the typical 1% of assets fee or commissions. They often develop tunnel vision and focus only on investments. This type of advisor gets paid to manage money, not provide comprehensive advice around your entire financial life.
In fact, the typical financial advisor often practices something called “financial planning lite.” That is, it sort of looks like financial planning, but it doesn’t truly cover all the relevant areas of your financial life. I have even seen advisors refuse to look at a client’s tax return because “we don’t do taxes.” Seriously? The client isn’t asking you to fill out the tax forms! They just want to know if it makes sense to do Roth conversion or adjust the timing on their charitable giving. That’s financial planning 101.
Thankfully, I’ve noticed more advisors engaging clients to provide comprehensive planning. But there is still room for improvement. If you work with an advisor who isn’t meeting your needs, or you aren’t 100% confident in your financial situation, consider shopping around. You might be able to find a better level of service at a more reasonable price.
