are both professional financial planners. Our journey
to this work began with the personal challenges of inherited
wealth, the confusion and dislocation of finding oneself
with more than others. We soon recognized that learning
about financial decision-making would be part of facing
our issues around wealth. We've never forgotten what it
feels like to be on that side of the desk, but we have
also been stunned by what we observe from this side of
the client-advisor relationship. From these experiences,
both personal and professional, we see two factors that
inhibit wise investing: fear and power.
Time and again, people pay us to help them work out strategies
which we later find out were never implemented. It seems
that in the face of financial decisions, many otherwise-capable
people become as immobilized as deer caught in the headlights
of an onrushing car. They are terrified of making a mistake.
this sounds like you, know that you are not alone. For
many, the fear of losing money is intense, even when it's
only numbers on paper and won't affect your quality of
life at all. (According to one recent study, people experience
the loss of money two and a half times more intensely
than they experience the same amount of gain.) Create
reasonable standards for success. Just as baseball players
know that hitting the ball 30 percent of the time means
that they're having a good year, experienced investors
know not to play the stock market for a perfect score.
Allow yourself the right to make mistakes.
it is true that you can't control everything, you can
control your personal goals. You can be clear about what
return is essential to you, what is merely desirable,
what level of loss you could sustain without any loss
of life satisfaction, and what your time-frame and cash-flow
needs are. Getting a handle on these variables can affect
your financial success as much as, or more than, uncontrollable
market fluctuations. A trusted advisor can help with this,
but they can't figure it out for you. Developing your
own vision of where you want your money to take you is
the best antidote to fear and uncertainty.
When you work with an investment advisor, observe the
texture of your working relationship. Do you have an "investment
advisor as wizard" assumption and expect your advisor
to possess super-human knowledge in the face of random
market moves? Do you secretly view your "investment advisor
as servant," because money is dirty and thinking about
it crass, so a servant is needed to attend to the distasteful
tasks? Sometimes the two attitudes even blend into a wizard-servant
combo, akin to the fairy-tale counselor who can tell the
king what to do but can also get his head chopped off.
too, your advisors' attitudes about their fiduciary role
(which simply means their legal and ethical responsibilities
to act in your interest). The phrase carries unfortunate
connotations from other fiduciaries: executors, who act
on behalf of someone dead; conservators, who manage property
for the mentally incompetent;
and parents who handle custodial accounts for their children.
Are you dead, incompetent,
or a child? If not, remind your fiduciaries of this fact
if they treat you as if you were.
if you did not earn your assets with your own labor, they
are yours. You pay taxes on them. If you believe that
you're just a conduit to the next generation--as so many
inheritors do--it's just saying that you are not important.
You are. This stuff is yours, and you're making choices
about it. We have seen people do more research and soul
searching about what brand of TV to buy than they do when
buying $200,000 worth of stock! Even abdicating your power
(by letting your advisor manage the money without your
input) is still a choice.
a first step towards claiming power over your money, figure
out exactly what assets you have and calculate your net
worth (assets minus debts). Sometimes it also helps to
write the story of how the money came to be yours. Think
deeply about what the money means to you.
whether you simply don't yet understand investments, or
whether you don't believe you can understand--especially
if you are a woman. If you believe that you can't understand
investment decisions, if your eyes glaze over as soon
as you see an investment statement, then you have to debunk
the mystery. Know that you are absolutely capable of understanding
the issues involved and participating in the decisions.
Financial professionals can offer some additional information
and help frame a systematic approach, but we use no magic.
- anonymous authors
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