Everyone gets financial advice somewhere. Families, friends, news, and paid advisors all want to tell you what you should do with your money. At some point, you have to figure out which investments are right for you. You have to be your most important advisor.
My grandfather was once given a piece of advice: Don’t invest in life insurance, invest in a life insurance company. It’s a piece of advice he followed, and was able to amass a pretty large holding in Jefferson Pilot. He died, and left it to my grandmother. As she got older, it was distributed to her 5 children, and some of it went to grandchildren.
When the stock was transferred to me, I was given strict instructions. I was to leave the money in the dividend reinvestment plan and not to touch it. For a decade and a half, that’s what I did. I knew how lucky I had been to be given this gift, and protecting it was a high priority. My mother reinforced this strategy strongly and vocally. The stock stayed in the dividend reinvestment plan when I moved to another city, when I struggled to pay down debt, and when I bought my first house. It grew, and did well. And then, in 2005, Jefferson Pilot was acquired by Lincoln National.
By 2005, I had other investments, but probably 90% of my holdings were in Jefferson Pilot. I trusted Jefferson Pilot. JP had solid fundamentals and a good investor track record. I didn’t have the same level of comfort with Lincoln National. I talked to my mom, who released me from her restrictions with a “Gosh, I sold most of mine a while ago.”
And then I went and talked to my financial advisor.
At that point, I was working with Chris, my third financial advisor. I don’t remember exactly how I got introduced to him, but we seemed to have developed a better relationship than I had with my first advisor. After over a decade of looking at investments, I felt a lot more confident about my abilities and ideas.
We agreed I would leave a healthy chunk in Lincoln National (which, I will say, has done very well over the last decade), but would look to diversify my assets.
Then Chris gave me his recommendations: almost everything remaining after the agreed stock sales would go into a diversified mutual fund portfolio. Immediately, I had some creeping misgivings, but I couldn’t explain why. So I delayed making a final decision on what to do with the money, and tried to think why I didn’t want to go with Chris’s recommendations.
It finally hit me. Chris wanted me to go with a portfolio that was 90% individual stock, and 10% mutual funds, to one that was closer to 90% mutual funds and 10% individual stocks. At this point I had almost 10 years with mutual funds, and had seen how they had done (or not done). My JP stock had been through stock splits and dividend reinvestment, and had grown handsomely. The two mutual funds I had been investing with, not so much.
Making a Decision
I called Chris and told him to give me some possibilities that weren’t so mutual fund heavy. I would diversify, but I would also continue to invest in dividend-paying individual stocks as well as mutual funds.
I realized that I had already developed an investment philosophy, and I wanted to keep following it.
At that point, I still wasn’t the best at seeing the reason that the performance in my mutual funds was making me hesitate. It was only much later that I learned to look at the fee schedules in addition to the asset mix and the historical performance. And I’m still not sure that I love some of the stock picks he gave as an alternative. (Except Altria. I love MO, and its continuously rising dividend). But Chris did give me alternatives that fit me far better, and all because I knew that the first investment plan he gave me, while “safe” and “diversified” and “age-appropriate”, was not the right plan for me.
I knew the investments that were wrong for me, and I listened to myself. Learning the lesson that I was my most important advisor was a big step in my investing journey.
How to Be Your Most Important Advisor
In the intervening years, I’ve worked with two more financial advisors. I understand now that their job is to advise, and mine is to make the decisions about my money. To make good decisions while working with an advisor, I make sure I follow these rules.
- Listen to your advisor’s advice, even if you don’t follow it. You’ll learn more, and the conversation may bring you to other important realizations.
- Ask a lot of questions. Your advisor may not understand all of your concerns, and your questions can help guide them and you to better decisions.
- Don’t feel pressured to make a decision right away. Take time to think about things and to do your own research. If your advisor’s recommendations don’t feel right to you, they probably aren’t right for you.
- Talk about your investments with another person, particularly if you have reservations. It was only by bouncing Chris’s initial ideas off of several friends that I realized that I had an investment philosophy already that I had not articulated before.
- It’s okay to revisit old ideas. On at least 3 occasions, I’ve declined to follow my advisor’s recommendation on a stock purchase initially and come back to it months later. That’s probably because I paid more attention to the company in the intervening months.
Remember, no one cares for your money as much as you do.
You can learn a lot working with a financial advisor, and you can have a good experience. Just keep in mind that you need to be your own most important advisor.
Do you work with a financial advisor? What have you found to be your rules for choosing who you get advice from and how you follow that advice?
This article is for information purposes only. I am not a financial advisor, although I advise myself. Past performance does not determine future performance, and an investor should proceed with caution and do lots of research before putting their money in any investment.
This article was originally published 8/17/15 and revised 8/17/16.