Today I would like to address a very simple question: where do you go for advice?
A very straightforward inquiry but an important one nonetheless. As it often is in personal finance, sometimes the simplest questions can be the most revealing and thought-provoking.
To help illustrate what I’m referring to here, I’d like to start with a personal story that I’m sure some of you can relate to.
I couldn’t have been older than 21 years of age, and I was doing quite well for myself financially managing a local fitness center. As it is, when you have a decent income, not much responsibility, and low overhead, you are left with a fair amount for discretionary spending.
I was relatively new to my faith but very involved in my church. Being a young man and living far from my family, I leaned on my community at church – they were my family. I had numerous surrogate moms and dads around the church who I leaned on during those formative young-adult years.
So, what does any youngster with extra money aspire to do? Buy a cool new car. I had my heart set on a Mini Cooper and was ready to go on a treasure hunt for an affordable used Mini. This was a big life decision (at least it was at that time), so as I typically did, I sought some wisdom. I figured I’d tap on the shoulder of a well-established father figure at our church. The one with the nicest house, nicest car, and who worked in finance. All signs pointed to this being the best source of guidance.
I thought to myself, “I want to be like that guy one day.”
I’ll spare you all the details, but sure enough, my car-purchasing-mentor had a friend in the industry who he said would “help me out and give me a great deal.” In the blink of an eye, I found myself signing a three-year lease on a $50,000 BMW. I walked in looking for a used Mini and walked out committed to a lease payment that was more than my rent at the time.
I vividly remember leaning on this gentleman from church to guide me and advise me. He encouraged me that “I deserved this” and that “I’d earned it.” Let me be clear, this man was/is a good man – he’s kind, generous, faithful, and a real family man. It was difficult to watch the struggles he later experienced during the financial crisis of 2008 and to see all the luxuries that I identified him by stripped away.
Oh, and that BMW lease, I would end up returning the car one year early because I had already used all of the allotted miles, essentially flushing a year’s worth of those sizable monthly payments down the toilet.
This was when I learned a lifelong lesson that “Can you afford it?” isn’t the right question to ask. When you find yourself with a surplus, you can afford a lot of things, but it doesn’t mean you should purchase them all.
So, where did I go for advice? I went toward my impression of wealth. I learned that looks can be deceiving and that advice always needs to be tested. I didn’t feel right having a car payment that dwarfed all my other expenses, and it also didn’t help that my second-highest monthly expense was my car insurance.
It was shortly thereafter that I met a “financial advisor” and agreed to take a meeting at his office. He introduced me to his senior partner, who delivered a pitch about financial freedom and how the path to get there was whole life insurance. I said yes to the BMW, and I regretted it, but luckily learned my lesson, trusted my intuition, and avoided the premium-heavy commission-heavy insurance policy. I will note that the advisor/agent drove a similar fancy BMW and wore lots of shiny jewelry; I wasn’t interested in allowing my eyes to trick me twice.
I’m sure you have your own similar story. Life is the best teacher, right? What I really want us to meditate on here, though, is the great importance of where we go for advice – who’s got your ear? When I meet with a potential client, we often review their current portfolio, and I simply ask about how the portfolio was designed. A common response is a narrative that walks me through the mosaic or quilt of different tidbits of advice that led to each investment purchase. Who are the common advice-givers in this narrative? Social media icons, billionaires, pundits, college roommates, and the such.
It’s obvious to all of us that we could go down the logic train to discuss if these folks are qualified to give advice or if their advice is relative to the recipient, but I want to focus our attention elsewhere. Ask yourself this, will the person giving me advice be accountable for this advice? I can’t stress enough how important accountability is.
If you see Warren Buffett recommending a stock on CNBC that you buy, I ask you, how will you hold the Oracle of Omaha accountable for this advice?
A Wall Street Journal article gives you an idea about a tax strategy that you deploy. I ask you, who at the journal will you call if an audit reveals that you didn’t qualify for this strategy?
Your favorite TikTok star gives you his or her investment idea of the week. I ask you, will you be expecting a DM response if this investment doesn’t live up to your expectations?
Advice and accountability are like peanut butter and jelly – they just belong together. I know accountability can sometimes have a negative connotation. I’m not encouraging the I-told-you-so-always-looking-over-your-shoulder-trying-to-catch-you-slipping-up type of accountability. I’m talking about the type of accountability that’s rooted in trust. An advice-giver that understands the responsibility they have and elects to be accountable for the advice they give.
A lot of advisors – not The Bahnsen Group – outsource the investment management for their clients. A lot of advisors – not The Bahnsen Group – try to skate this accountability by shifting blame to the investment manager.
You want. Scratch that. You deserve advice from a party that wants to be accountable for the advice they give.
So, I conclude with the same question we started with, who’s got your ear?
Trevor Cummings
PWA Group Director, Partner
tcummings@thebahnsengroup.com
