For many people, the end of the year is a marker of time. We pause to reflect on where we are in our lives and set new goals. Often, those goals involve making better financial decisions, finally launching that exciting business idea or developing a new investment strategy.
In fact, as a financial life planner, what I call the “money season” — now through late winter — is when I receive the most meeting requests.
This time last year, I had one of those meetings with the CEO of a very successful company. He told me he was piloting his household finances, but wasn’t necessarily comfortable with all his decisions.
“I am a very thorough and thoughtful executive running a large company, but I feel bad that I probably haven’t touched all the bases on my family’s issues,” he told me.
I assured him he was not alone. Behavioral economist Richard Thaler recently won a Nobel Prize for his work examining people’s irrational rationalization of the choices they make. His research proves we all have blind spots that lead to less-than-optimal outcomes.
Like many smart and successful people, my client fell into the trap of believing solely in his own abilities, before realizing his error. I wanted him to know his feelings of regret and insecurity were both unnecessary and unproductive, and that a successful course correction was absolutely possible.
Being your own financial planner is a bad idea, even for a financial planner. That’s not to say you aren’t smart and capable of making sound business decisions. In fact, you might have all the analytical tools necessary to pilot your own financial life from start to finish. However, there is a built-in limitation: objectivity.
We simply don’t have the ability to see ourselves, our behaviors and habits (and those of our family members) through a lens that isn’t clouded by a set of rules and beliefs. The fact is, your money mindset — or money imprint — is unique to you and sets the stage for your behavior.
Does that behavior include skepticism regarding advisers who may have built-in conflicts of interest tied to the financial counsel they provide? If so, a fee-based relationship is your path to a purely objective financial planning relationship. Check NAPFA.org to find fee-only advisers and read their disclosure brochures.
Many advisers are keenly focused on your investable portfolio, specifically how much money it can make them. They won’t ask the right questions or listen attentively. Look for someone who will challenge your assumptions, assess your situation without presumptuousness or a conflicted position, and make sure you’re on a financial path that matches your values.
Managing your finances is time-consuming and only becomes more so as you accumulate wealth. If you’re like me, time is among your most precious assets. Instead of putting “create a financial plan” on your list of New Year’s resolutions, consider channeling those extra hours into more productive and meaningful endeavors.
Financial Life Focus is a financial life planning firm.