A reader asks:
Which purchases and decisions do you want your customers to be carried out by you first? Which would you prefer to just live their lives without asking? I am in Ben’s shoes with an imminent home project that will probably spiral. Ran it through our planner, but always wondered … what makes a customer annoying?
I can already see that this person is a good customer for the simple fact that they are self -aware enough to even ask.
The people who are actually annoying in any business relationship or life in general-Missen self-consciousness.
My general rule of thumb here is the more information the better. Good financial advisers want as much information as possible about your circumstances, so that they can help you make more strategic decisions.
Hiding financial information makes it much more difficult for your adviser. If you are willing to share about your finances, spending habits, goals, etc. and your adviser is irritated, that is up to them, not you.
So what types of purchases and decisions do you have to run through your adviser? This is not an exuuastive list, but here is a good start:
- Large ticket items: House, boat, home renovation, university education, holiday -owned, etc.
- Major changes in life: Career movements, early retirement, marriage, divorce, children, a death in the family, etc.
- Business companies: Starting options, starting a new company, selling a company, making new private investments, etc.
- Reserves: Outside of cash reserves or investments that the consultant does not know.
- The boring things: Insurance, estate planning, trusts, wills, etc.
- Goals: Changes, updates and overhaul in your desires and ambitions with your finances and life.
- Spending patterns: Advisors need to know whether your budget changes meaningfully.
- Savings prices: How much you save and contribute to your investments and where the money goes.
I am sure I missed a few things, but good financial advisers want to hear from you about this stuff. The more they know about your finances and expenditure habits, the better.
I have attributes in mind what makes a good customer, but let’s pull a Charlie Munger and reverse by showing what it looks like to be a bad customer first:
The performance hunter. Why don’t I defeat that benchmark? Why beat the S&P 500 my portfolio? Then why is my portfolio this year? Why am I only 23% on when my golf buddy has risen 27%?!
Everything is recent. Why do I possess that thing that it just did really well? You should have placed my portfolio in it instead of that junky activa class that just chased. Small Cap shares have fallen this year. Take me out!
The customer viewed afterwards. Why did we not fully respond to Nvidia?! Why didn’t you buy Bitcoin for me? We should have had all my money in technical shares.
[in a bull market] Bonds are meaningless. We all have to be in shares and call the risk.
[in a bear market] I think we have taken too much risk in shares. We have to call it.
The Macro -Worrier. The government debt is too high. The system is permanent. Oh no, rates rise! No, rates are falling! This politician is going to crash the market! Did you hear about the straight of Hormuz this week?
The Waffler. I can’t make a decision. What if this happens? But what if that happens? If I take too much risk, I could lose money. If I don’t take enough risk, I will never earn money.
Irrational trust. Just choose the best shares for me. I want 12% guaranteed every year and I don’t like volatility. Just turn every year in the best performing asset classes and avoid the Duds.
The market timer. I just want to get off for a while until the dust sinks. I swear that I will come back in. Until the elections …
I think it’s time now to double and go all-in.
Here is how you can be a good customer:
Tell your adviser what you want. Be clear about your priorities and values. Tell your adviser exactly what you are looking for in terms of portfolio management, expected returns, communication cadence and reporting needs. It is the work to do it for you. If they can’t do it? They have to tell you that.
Financial advisers cannot work, but the clearer you are about what you want, the better they can adjust a plan that meets your needs.
Ask questions. We do not live in a financial world of “Trust us, we have this more”. A good financial adviser will be transparent and in advance about their entire service model.
You must feel comfortable to ask questions about the business model, services, costs, philosophy and financial planning process of your adviser.
You have to rely on their process to make the relationship work, but you must first verify that this is suitable for you (just like they should find out if you are suitable for them).
What do I have and why do I have it? Why is this my allocation? Why are we doing it this way? How much do I pay all-in costs?
You can outsource your planning, but not your understanding of the plan.
Be realistic. Your adviser should set expectations. You also have to go with reasonable expectations in that relationship.
Proactive communication. It is always best to check in with your adviser for a big decision. You may not need their help, but it is possible that there are financial or tax consequences that you are not even considering and a good financial adviser must be able to provide some checks and balances.
It is much better to have too much plan than trying to repair errors after the fact.
Emotional intelligence. Financial advisers are just as susceptible to emotions as someone else. Those emotions can simply be different from what the customer stands for, because nobody cares about your money than you.
It is good to inform your adviser about mistakes from the past or the money motions – anxiety, greed, envy, guilt, regret, etc. – which influence you most.
If a financial adviser understands your concerns and limitations, they can build it in your plan.
Bill Sweet And I discussed this question about a completely new episode of Ask the Compound:
We have also answered questions about all the crazy market volatility that we have experienced this decade, all new tax alpha strategies, 401k -rollovers with $ 30 million and whether you should have a house in Colorado.
Continue reading:
The future of investment management is the paradox par excellence
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