I hope you, your family, and your friends enjoyed a nice Memorial Day weekend.
Today, I’d like to talk briefly about simplicity – and the lack thereof – as it relates to most financial advice.
One of my favorite quotes come from Leonardo da Vinci:
“Simplicity is the ultimate sophistication.”
In fact, I’ve mentioned the above quote in at least three previous articles:
I’ve found over my 20+ years of working with folks like you that “simplicity” is often missing from the financial plans and advice you’re receiving.
But it doesn’t have to be that way.
I was reminded of this recently when reading this article from Fred Wilson, a New York-based venture capitalist.
While Fred is talking about “dumbing things down” in the context of technology and entrepreneurship, I feel that the same approach applies to financial advice.
Perhaps it’s even more important when it comes to your finances and your life . . .
From Fred’s article . . .
. . . the General had advised him that “I don’t care how brilliant an entrepreneur is, I won’t back them if they can’t explain themselves simply and in a manner everyone can understand.”
I think you should hold your financial advisor to this same standard.
If they can’t explain themselves simply and in a manner everyone can understand, you have to wonder if they actually understand their advice themselves.
Instead, many advisors use complexity and confusion in an attempt to seem more sophisticated while charging you higher and higher fees.
It doesn’t have to be that way.
Next time you’re on the receiving end of advice that is anything other that simple, clear and understandable, ask your advisor (whether financial, health or otherwise) to explain it in terms that an 8-year-old could understand.
If they can’t, it might be time to seek advice elsewhere.
To better understand the nature and scope of the advisory services and business practices of Wealthcare Capital Management, Inc., please review our SEC Form ADV Part 2a, which is available here. Past performance is not a guide to future returns. Before acting on any analysis, advice or recommendation in the above content, you should seek the personalized advice of legal, tax or investment professionals. By selecting the links in the above email, you may be redirected to third party websites not under the supervision of Wealthcare who may have different privacy policies than Wealthcare.
But first, I have a question:
What do you consider “long-term?”
For some, the idea of long-term is 5, 10, 20 or more years into the future. This is also my idea of long-term.
For others – you know who you are – long-term is, depending on the circumstances, a matter of seconds, minutes, hours, days or weeks. But it certainly isn’t measured in years.
The Parkinson associated with the above “law” is C. Northcote Parkinson, a British naval historian and prolific writer.
I suspect you’ve heard of Parkinson’s law, or some similar variation before. But today, I’d like to draw your attention to Parkinson’s other law.
His law of triviality.
In 1957, Parkinson suggested that organizations often give disproportionate weight to trivial issues.
Here’s a story that Parkinson used to explain this phenomenon . . .
Many people I meet are under the impression that if diversifying their investments is a good idea, then diversifying their advisors must be a great idea.
Why work with one advisor when you can split things up among 2 or more advisors and get different perspectives and let them “compete” against each other?
This very situation came up recently when I received an email from a woman that I was referred to. She is not yet a client.
First, I’d like to thank my friend Brian for the inspiration for this week’s article.
Brian shared something on LinkedIn last week that caught my attention and has stuck with me the past few days.
So now, let me introduce you to another Brian.
This time, it’s Brian Dyson, former CEO of Coca Cola Enterprises.