There might be scores of financial advice books available, yet when it comes to being successful with money, it always seems that what's more important is just a few basic rules. No one has summarized these more succinctly than Dick Wagner, my friend and a fellow columnist in this magazine. "Wagner's Rules" are:
1. Spend less than you make;
2. Save all you can; and
3. Don't do anything stupid.
We live in a time and a nation where only the minority lives by rule No. 1, and because the rest don't, they consequently cannot follow rule No. 2, and so they are all perpetually susceptible to breaking rule No. 3. This is what the field of behavioral finance has been trying to articulate with $100 words.
If we make less than we spend, we open the door to the temptation to dabble in schemes that promise unearned bounty, to try and get rich quick and to chase the latest investment fads.
All humans are, to some degree, capable of doing something stupid, which is exactly why we need advisors. On second thought, this is the reason we need advisors who advise instead of advisors who sell.
As humans, we are prone to making errors and violating our own best intentions. Because of our flawed psyches, a good advisor is indispensable and worth everything he or she earns. This is precisely the reason I need to know that I have the right advisor for me. Who is the right advisor for me? It is the one who operates by inviolable principles and has a clear philosophical match with me in what I believe it takes to be successful. In many cases, it is the advisor who is teaching the client what a successful fiscalosophy is all about.
Are you and your clients aligned philosophically on
financial matters? Do you have a method for determining what your clients' philosophical constructs are and how they obtained the mores they abide by? If not, these relationships could become problematic.
Have you developed a script for getting across to clients and prospects your fiscalosophy-how and why you make the money decisions you do? Do you lay out the fundamentals of your philosophy early in your presentation? Before talking about strategies, tactics, allocations and categories, it is important to lay out the foundation of how you think about investing and money matters.