Why I have a financial advisor of my own.

By: Sam Swift, CFA, CFP®

The ongoing process of financial planning requires a certain amount of expertise to navigate through all of the various options and potential pitfalls. If we were robots then we could just program in the required knowledge and be experts at our own financial life. However, because we are human (at least I assume all of the readers here are such) there is another part of the planning process that is a huge factor: objectiveness. Now, I have all the knowledge one needs (I better—this is what I do for a living after all!). I am a CFA charterholder and a CFP® certificant which are two of the most respected designations in the industry. Unfortunately, no matter how much I know or how well I train myself, I can’t detach from my own emotions regarding my financial situation. This is why I have a financial advisor of my own.

I’m not alone. Every advisor at TCI uses an advisor for their personal situation and there are many others in our industry who do the same. Obviously it’s not about the knowledge for us, but about having someone to look at your situation objectively and tell you what you need to hear.

I heard about an experiment recently where undergraduate males were posed a scenario: “You’re thinking of calling a girl from your psych class that you like, but you’ve only talked to her once and you’re afraid she may not know who you are when you call. Do you pick up the phone and call right then or wait until you’ve had the chance to talk to her a few more times before calling?” The overwhelming response of the male undergraduates was to wait. However, when the same scenario was posed as if they were giving advice to a friend in the same situation, the majority responded that they would recommend that their friend call immediately. The researchers postulated that the risk of embarrassment when the males thought of themselves in that situation overwhelmed their decision making process. When they were in the position of giving advice to a friend, they were able to more objectively weigh the risk and reward.

This exact concept is why everyone could use a planner, advisors themselves included. For example, there are some advisors in the industry who are still nervous about their own financial situation even though they’ve put themselves in great shape. They need to be objectively reassured so that their pessimism doesn’t cause disaster down the line or lead them to other unwise decisions. On the other hand there are advisors out there who procrastinate on tying up their own financial loose ends. They need the accountability from an objective advisor to give them the kick in the butt they need so their plan doesn’t fall apart from a silly mistake. Again, these are great advisors to many clients who end up sounding like the average Joe when it comes to their own situation. It’s extremely challenging to look objectively at your own plan no matter how knowledgeable you are.

Finally, all of this reminds me of a great, personal story that a one-time colleague of mine wrote in the New York Times a while back: How a Financial Pro Lost his House. He’s not the only advisor to have his judgment clouded when it comes to his own plan and he certainly won’t be the last. Everyone needs the expertise to put together a successful financial plan, but even more they need an objective voice to guide them along the way.