The Core Confidence of Advice

“What do you do?”

It’s the eternal ice breaker. For some, it’s a quick way to size someone up. For others, they aren’t so much interested in your answer, but are keen to tell you what they’re all about. It can lead to an interesting discussion, and depending on the profession, it may prompt some testy comments because there are always preconceived ideas about what someone else does.

For financial advisers, answering the question can bring a variety of interesting responses.

There are many ways it can go:

Genuine interest. Something that is always welcome. Always happy to have a good conversation explaining the benefits of financial advice and talking about the differences good advisers can make in peoples’ lives.

Ribbing about being some type of crook. This one’s quite easy to address. Most of our like-minded financial planning colleagues are proud of our records. We have detailed and well considered processes which span custodianship to asset management. We help people navigate life transitions and prepare them for future change, through good planning and investing. For many people, we have been and will continue to be a vital service. No crooks anywhere in sight.

Implying financial advisers are pointless. This one stems from how easy it is now to invest. The misconception is that all financial advisers do is drop someone’s money into some funds. Online brokers and ETFs now ensure the playing field is level and more democratic than ever. Ignoring any strategy, technical knowledge, insurance coverage, DIY investing is a valid option. But DIYers,  who have put together portfolios they don’t fully understand the risks of, can currently be found on investment forums seeking feedback on their investment strategy.

Despite having committed to long term investing, a rough 2022 and several interest rate rises, has seen them reconsider. DIY investors rarely have the benefit of long run datasets to understand how the funds they own have historically performed. The important part is knowing the downside. This leaves them asking complete strangers if they should liquidate their portfolios and dump the proceeds into their mortgage.

Offering up their latest investment decision. Always interesting. It can be a boast, acting on a hunch or seeking some feedback or validation for their decision. Maybe it’s a stock pick. We don’t offer anything in the way of feedback because we don’t follow individual companies - they’re the shareholder so they should be the expert! Sometimes it will be a weird speculation or attempted tax dodge they’ve likely sunk too much money into and want reassurance.

More often it’s something based on a macroeconomic forecast of doom. They’ll proudly proclaim they’ve taken charge of their superannuation account and now only hold cash because of some disaster, they, or someone else, believes is just around the corner. They likely had a well-diversified portfolio spanning multiple asset classes and whatever disaster was afoot either quickly passed or never occurred at all and the market moved on. Whether they learned their lesson or doubled down, scanning for further calamities to justify their actions, we’ll never know.

A trust statement on financial markets. This one’s never about how efficient markets are. Nor is it about how great it is we can all participate in capital markets and be rewarded with a return on our money over the long term. It’s how they don’t trust financial markets and they’re either a scam, casino, or place to rob people of their money.

Probed on what the issue is, they may have lost money punting on a single stock. These people are the aftermath of the ones who offer up their latest investment decision for appraisal. They didn’t realise they were speculating. Essentially a coin flip with thousands of dollars gone wrong. It’s not their poor decision that gets the blame, but the big bad market. Alternatively, the person has never participated, further convinced this was the right decision by every terrible headline they see when markets take a plunge.

It would be nice to clear up misconceptions or put people on a better path from a single conversation, but it’s not realistic. Beliefs are hard to turn, and it’s hard to convince people that you’re good, that financial markets aren’t rigged, or that times are better than they think.

While these are general investment conversations, after years of discussions with investors, potential investors and people who want to offer comment on the profession or financial markets, we’ve come to believe there’s a much deeper problem.

Many people lack a core confidence. It leaves them suspicious someone’s going to do them over. Believing they need to trust their gut over getting advice, then fretting about what their gut decided. Thinking we’re collectively on the edge of disaster, everything is screwed up and they need to be on alert to take evasive action.

These concerns aren’t as much of an issue with the clients we work with. That’s not to say advised investors don’t have doubts occasionally, that we’ll talk them through. That’s part of the job, especially as financial and economic concerns can intersect with family, career, health, and ageing challenges in peoples’ lives, but there’s a core confidence that we notice clients develop over time.

What price is clarity, peace of mind and this core confidence? Of course, there’s the dollar figure, but then there’s the hypothetical question.

How much better does an investor do by trusting someone, having an actual strategy, not second guessing themselves every second month, not riding a stock pick or jumping into a scheme they really don’t know anything about, or just having a belief that markets work for them long term and not being derailed by forecasts of disaster?

That’s the sliding door. No one can see how much better they’ve done, but having a core confidence must be a valuable feeling when measured against the alternative.

This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.

With thanks to FYG Planners for the original article.