Making sure advice fits like a good shoe
According to a 2020 study, around 50 million Americans participate in some form of running or jogging. Besides it being associated with many physical, mental and emotional benefits, running is a very accessible sport. You don’t need to travel anywhere to do it, it is free, and the only equipment required is a pair of running shoes. Or rather – a good pair of running shoes.
Marilyn Monroe once said ‘Give the girl the right shoes and she can conquer the world’. The right pair of running shoes may not help you conquer the world, but it is going to play a big part in your performance and risk of injury. Walking into a running store and looking at all the shoes lined up on the wall can be a little overwhelming – with so many options out there, how can you know which shoe is best for you? That’s where the store shoe expert comes in.
The first thing they will ask is what you intend on using these shoes for. Do you intend on using them on a treadmill? On the road? Trails? How many miles do you run per week? They should be trained to understand what your objectives are and recommend the shoe that will take you to your end goal. We see this type of expertise in other areas of our lives. For example, we can hire an agent to help us find our dream home, a dentist to cure our toothache or a financial advisor to help us reach our financial goals.
A financial advisor is a qualified professional that provides expertise for clients around their financial lives. An advisor can help you define your goals and objectives, provide you with a financial plan on how you can get there, and help you make important decisions around your finances.
Most decisions we take in life tend to have two aspects to them – an emotional one and a financial one. When it comes to buying shoes, we tend to look at aesthetics more than functionality, meaning that we are more likely to take a decision based on our emotions rather than logic. A wrong decision here can cause injury and discomfort. A wrong decision in our finances can cause bigger losses than a sore knee – it can lead to losses both in terms of immediate cash and in the opportunity to make money. A study carried out by Daniel Kahneman showed that when left to our own devices, 90% of our financial decisions are based on our emotions and only 10% are based on logic. Whilst not all emotional decisions are wrong, the most successful financial decisions are made when they are based on a good balance of logic and emotion. This is where a financial advisor can help.
A financial advisor will understand your objectives and the emotions behind them, and combine that with logic to help guide you toward the best financial decision based on facts and your best financial interest. The choice of advisor, however, is a very important factor – your advisor can steer you in any direction, and you need to make sure it is the optimal one.
Choosing a financial advisor is similar to choosing a training coach. A trainer will sit down with you and understand what your goals are and then draw up a plan for you to follow to reach them. When you experience difficulties or unexpected injuries, the trainer should guide you through them and continue to encourage, coach and guide you forward. A bad trainer could do the opposite, and may even end up hurting you. Similarly, a good advisor will take the time to understand your goals, build a plan on how you will get there, create a clear strategy for you to follow, and be there to support you along the way. A bad advisor, however, will not serve you as well. Therefore, the choice of advisor is a significant one.
When choosing an advisor, just as when choosing a new shoe, it is important to remember that one size does not fit all. We all have our own personal goals and objectives, and the right advisor will take these into consideration when drawing up your plan. Independence is an important determining factor in the advisor you choose. An independent advisor will give advice based on the whole financial market, and do not represent or are affiliated with any particular financial services company. This ensures that the advice they are giving you is unbiasedand in your best interest. Finally, when you are looking at your financial future, a financial advisor should be able to clearly communicate the value that they offer when you work with them. Just as you do not need to purchase an expensive racing shoe if you only want to run on a treadmill, you need to have the right type of adviser for your circumstances.
Our two cents: Finding a good financial advisor will increase your chances of making the right financial decisions and not rely too much on the emotional side of things. Speak to us at Extended Investments Limited and find out how (and if!) we can help you.
