Is your financial adviser a replacement ref?
As the NFL season has kicked off, fan enthusiasm has been blunted by an abundance of missed calls by the unappreciated and unloved replacement officials.
We have been pining for three-hour football games where officiating blunders were secondary to the Vikings' depleted secondary.
As the season plugs along, it's time to ask yourself "Is my adviser a replacement official?"
If your adviser bullies or blusters, then he or she is a replacement official. You are not simply paying someone for advice, you are paying for advice that is specific to your situation. Recently, our firm was working with clients who are siblings who have inherited money. Each of the them is in a very different financial situation and, more importantly, each has a different view of money. While their assets are similar, their advice cannot be.
Advisers cannot have all the answers because there are too many variables in any situation. While most financial decisions don't have a deadline, there is still a fine line to walk between procrastination (over fear of making a mistake) and inertia (from not being completely comfortable with the advice). If something is not sitting well with you, then get a second opinion -- hopefully from a professional without a vested interest in the outcome.
If your adviser is rigid in his or her approach, then he or she is a replacement official. It is important for your adviser to have a well-defined process for your planning. If that process is not consistent with what you want, then you should find a different planner. On the other hand, the adviser should not be a prisoner to the decisions from this process.
For example, I am completely ambivalent regarding long-term care insurance. But I view it as more of an emotional decision rather than financial one. One of our clients had sufficient assets so that she had no need for long-term care insurance. Yet her fear of needing expensive assistance later in life prevented her from experiencing more of her life today. We set her up with a long-term care insurance provider so she could enjoy herself without worrying whether she would run out of money. While the numbers said she probably didn't need the insurance, her demeanor said that she did.
If your adviser is too flexible with you, then he or she is a replacement official. An adviser needs to understand when he or she is no longer the right fit for the client, rather than completely bending to a client's demands. This can be difficult. One of our clients was terrified of the stock market. The couple were extremely good savers and did not need to have a large stock position -- even though they could easily afford the volatility of the markets. But they wanted to get stock market returns when stocks were going up and not have any losses when markets turned the other way. We knew that we could never provide this, so we parted ways. If we simply managed to their moods we would not have been serving them adequately.
If your adviser gets the replay wrong, then he or she is a replacement official. Very few investors understood their risk tolerance until 2008-2009. Once they suffered significant losses, they understood how comfortable or uncomfortable they were with market volatility. But some of those people who were most concerned during the market's plunge (and even missed its subsequent rebound) are wanting to become aggressively invested now to make up for lost time. Check the replay! You can't just ride roller coasters up. Risk tolerance can only be measured after the fact; if you couldn't handle the last drop, unless something has changed in either your situation or your advice, there is a high probability that you won't be able to handle the next one either.
Don't let the outcome of your financial game plan be dictated by replacement officials mentality.
Spend your life wisely.