You’ve undoubtedly heard the phrase “opinions are like @$$**%&$, everybody has one.” This could not be truer than in the financial planning profession.
Most advisors have a process that they follow when making investment recommendations and that often develops into a proclivity to use one investment vehicle over another. Meaning, we all think our way is the best way to achieve your goals…or, at the very least, one of the best ways to achieve those goals.
Read this next line carefully…and remember it.
YOU SHOULDN’T CARE.
Who cares if one advisor prefers to use ETFs, while another uses individual stocks and bonds? Your job, as the investor, is to verbalize VERY specific goals to the advisor, and then leave the heavy lifting up to us.
Consider this analogy. We are playing a round of golf in Fort Mill, SC. Captain’s choice tournament. We are 150 yards from the hole, and our team needs a good shot to setup a birdie putt. It is my turn to swing.
What is your goal as my teammate? It is to do everything you can to help me hit a good golf shot, right?
Scenario #1: I pull a 3 iron (my 3 iron distance is 240 yards) out of my bag, and proceed to skull a worm-burning ground ball that creeps up the fringe, rolls to the hole, and drops in. EAGLE.
Scenario #2: I choose a more applicable club, like a 9 iron, and stroke a gorgeous, high arcing shot that fades into the cross wind. It hits the green about 4 feet past the hole, and the backspin rolls the ball back into themhole. EAGLE.
One way is sexier, no doubt, but they both got the job done. Our goal was to hit a golf shot that was close to the pin, and we accomplished that goal. In fact, we MORE than accomplished the goal…we holed out. In both scenarios, I addressed the ball, swung a club and made a golf shot. I did not paralyze my team by arguing with them for 20 minutes about which club to use. I was decisive, and either way worked.
Investing is the exact same way. YOU, as the investor, should be very prudent to clearly communicate your goal to your advisor. *The more specific, the better.* Then, once they understand your goals, they will craft a plan of action that is custom designed to hit those marks.
Once that occurs, the investor has very little work left to do. Just stick to the plan. No need to crunch numbers every day, or to ask about the “HOT MANAGER OF THE YEAR” investment. That is just noise. Eliminate the noise, and trust that the advisor’s choices are well thought out, and are being used for a reason.
Also, ignore other advisors that try to snipe your investment plan. I have seen other advisors offer a “second opinion” on a portfolio only to pick up a client’s statement and crucify each holding individually in an effort to drive a wedge between the client and his current advisor. *Don’t let that happen.* This is the equivalent of saying “why did you use a 3 iron to hit that golf shot? You hit a 3 iron much too far to use that for a 150 yard shot. That club is not a suitable choice. I would use a 9 iron and hit a beautiful shot. Your club is bad, and your approach is wrong.”
The 3 iron still worked.
In most cases, that other advisor has a vested economic interest in disparaging whatever investments you currently own. He wants you to question the plan, question your current advisor, question the fees, etc. Then, he will offer you his version of the Holy Grail in an attempt to get you to fire your advisor and hire them.
This is noise. PO-TATE-OH, PO-TOT-OH
We all have our own preferences, inclinations, proclivities, and processes when it comes to investment choices…but as long as you clearly communicate your goal, you shouldn’t care whether we use the 3 iron or the 9 iron.