It's a hard proposition- trust has to be earned and I'm sure that the sales people want to be trusted without the sacrifices needed to earn that trust.
-Rick Francis
Carl Richards
· 2 months ago
Tough indeed. This is one of those "trust but verify" things.
Dylan
· 2 months ago
I think much of financial planning is based on the concept of delaying consumption. Planning is about finding and executing efficient ways to preserve present financial resources for later use. It all boils down to helping people not spend too much money; that's really what I do in a nut shell. Unfortunately, that sounds about as exciting as helping people take care of their teeth (no offense meant to the dentists).
I think a good response to the, "what do you do for a living," question might be, "I'm a REAL financial planner." Either you sit in peace and quiet afterword anyway, or it prompts the question, "what's the 'real' part for?" (or something similar).
Carl Richards
· 2 months ago
Delaying comsuption or at least understanding the trade-offs. And in some cases those trade-offs actually involve convincing people to spend more money.
I'll try that on my flight home tomorrow...
LB
· 2 months ago
So where do I find one of those?
RobBennett
· 2 months ago
The core problem is that the financial interests of financial planners are often at odds with the financial interests of their clients.
My focus is the problems with advocacy of Passive Investing. When you think about it a bit, it's easy to see why this idea became popular with financial planners. There are times when super-safe asset classes like TIPS and IBond and CDs offer a better long-term return than stocks. But there are never times when the commissions on the non-stock asset classes are as big as the commissions on stocks. So the industry stands to generate hundreds of millions by promoting Passive Investing (while bankrupting the rest of us).
It does not follow that the financial planners are deliberately leading us astray. People who work for Pepsi generally believe that Pepsi really is better than Coke. People who make a living selling stocks are drawn to theories that argue that stocks are always best. That's just human nature (the psychological term is "cognitive dissonance"). The effect is not limited to those who make money selling stocks. Those of us who have come to believe in Passive Investing ourselves eventually become defensive over challenges to it. We don't want to have been proven wrong even if our belief in the theory ends up costing us large amounts of money.
The answer? Self-awareness.
The emotional aspects of money management have barely been touched on in the literature. Yet they are probably 70 percent of what we need to know about to manage our money effectively. The good news is that if understanding of this point breaks through because of the economic crisis, we have the potential to learn more about how to save and invest in five years than we have learned in the past 50. The lessons that we have been blocking out of consciousness for a long time now can bring about an economic revival if the pain of failing to let them in gets great enough that we become a bit more humble about our present state of knowledge of what works.
Rob
Tim
· 2 months ago
Three reasons...
1. Some people are intimidated by math. Or they simply can't do math and hate it. In any case, sitting down with pencil and paper to compute a budget, income statement, balance sheet, savings and investment plan, etc. sounds a lot like doing "word problems" in their 8th grade pre-algebra class.
2. Some people are keenly aware that there is way too much they don't know about finance, investing, taxes, etc. A lot of effort has to be invested upfront learning about it all before they can even begin to apply things to their situation, and just thinking about that is discouraging. I fell into this category a few years ago.
3. If their finances are in shambles (and they are, for many people) then it might be a sore subject. Some people would probably rather not think about their financial future, hoping instead that it will just take care of itself in time.
In short, I think a lot of people are just embarrassed by their situation and their lack of knowledge for improving it. This probably makes them feel even more vulnerable to those who might be trying to scam them.
All Comments
-Rick Francis
I think a good response to the, "what do you do for a living," question might be, "I'm a REAL financial planner." Either you sit in peace and quiet afterword anyway, or it prompts the question, "what's the 'real' part for?" (or something similar).
some cases those trade-offs actually involve convincing people to
spend more money.
I'll try that on my flight home tomorrow...
My focus is the problems with advocacy of Passive Investing. When you think about it a bit, it's easy to see why this idea became popular with financial planners. There are times when super-safe asset classes like TIPS and IBond and CDs offer a better long-term return than stocks. But there are never times when the commissions on the non-stock asset classes are as big as the commissions on stocks. So the industry stands to generate hundreds of millions by promoting Passive Investing (while bankrupting the rest of us).
It does not follow that the financial planners are deliberately leading us astray. People who work for Pepsi generally believe that Pepsi really is better than Coke. People who make a living selling stocks are drawn to theories that argue that stocks are always best. That's just human nature (the psychological term is "cognitive dissonance"). The effect is not limited to those who make money selling stocks. Those of us who have come to believe in Passive Investing ourselves eventually become defensive over challenges to it. We don't want to have been proven wrong even if our belief in the theory ends up costing us large amounts of money.
The answer? Self-awareness.
The emotional aspects of money management have barely been touched on in the literature. Yet they are probably 70 percent of what we need to know about to manage our money effectively. The good news is that if understanding of this point breaks through because of the economic crisis, we have the potential to learn more about how to save and invest in five years than we have learned in the past 50. The lessons that we have been blocking out of consciousness for a long time now can bring about an economic revival if the pain of failing to let them in gets great enough that we become a bit more humble about our present state of knowledge of what works.
Rob
1. Some people are intimidated by math. Or they simply can't do math and hate it. In any case, sitting down with pencil and paper to compute a budget, income statement, balance sheet, savings and investment plan, etc. sounds a lot like doing "word problems" in their 8th grade pre-algebra class.
2. Some people are keenly aware that there is way too much they don't know about finance, investing, taxes, etc. A lot of effort has to be invested upfront learning about it all before they can even begin to apply things to their situation, and just thinking about that is discouraging. I fell into this category a few years ago.
3. If their finances are in shambles (and they are, for many people) then it might be a sore subject. Some people would probably rather not think about their financial future, hoping instead that it will just take care of itself in time.
In short, I think a lot of people are just embarrassed by their situation and their lack of knowledge for improving it. This probably makes them feel even more vulnerable to those who might be trying to scam them.