In my book, I outline three core investment principles that can help individuals make better financial decisions: have a plan, be diversified, and seek counsel. While these principles may seem straightforward, many people struggle to fully implement them. Among these, seeking counsel is often the most challenging to grasp, understand, and apply.
There are likely many reasons why this principle is hard to implement. Some common ones include our perception of self-sufficiency, fear of being judged, misconceptions about cost, and a lack of trust in financial advisors. However, two main reasons stand out. First, we often feel confident in our ability to do our own research—after all, we've been successful up to now. Second, we are not taught or directed on how to seek counsel.
The Challenge of Overconfidence
Overconfidence in our ability to manage finances independently is a natural byproduct of success. When you've made sound decisions up to this point, it’s easy to believe you can continue doing so without external input. This mindset is particularly prevalent among self-made individuals who attribute their financial success to hard work, intelligence, and perseverance. While these traits are invaluable, they can sometimes lead to blind spots. No matter how successful we are, none of us are immune to biases or gaps in knowledge. This is where seeking counsel becomes not just helpful but essential.
The strategy of going it alone works best early on, when our finances are relatively simple. At this stage, the biggest financial decisions typically involve how much to contribute to 401(k)s, buying a house, and living within our means. However, as both life and financial situations become more complex, financial choices are no longer black and white. Instead, there are numerous options. This is when input from both formal and informal sources can help us make the best financial decisions. It is the combination of these decisions over decades that makes a significant difference in your net worth.
The Importance of Learning How to Seek Counsel
The second reason many seem to struggle with seeking counsel is that we are simply not taught how to do it effectively. There are two types of counsel: formal and informal. The key to leveraging these types of counsel is to get accustomed to seeking input, even if you already know the answer or have a clear plan in mind. The more you seek input, the less weight you place on any single piece of advice. This might seem counterintuitive, but it's a crucial aspect of gathering counsel.
This approach also highlights a subtle difference between people who have money and those who earn money. As financial decisions become more complex, the answers often become more intricate, and there are usually multiple correct solutions. You might know a correct solution, but there could be better ones—this is what we aim for when making financial decisions.
Lastly, as we accumulate more assets, financial decisions become increasingly intertwined with other aspects of our financial lives. For example, when adding an addition to your home, the early decisions are simple—such as the size and height of the room. However, as you factor in doors, windows, plumbing, electrical work, roofing, and more, the decisions become more complicated because each choice impacts other parts of the project. This is exactly what happens with your financial plans and decisions as you accumulate wealth, which is why seeking counsel is crucial—to ensure you don't miss how one decision impacts another.
Learning how to seek counsel involves understanding whom to turn to, what questions to ask, and how to evaluate the advice you receive. It’s about building a network of trusted advisors who bring diverse perspectives and expertise to the table. Whether it’s a financial planner, a tax professional, or a mentor in your industry, these relationships can provide invaluable insights that help you make informed decisions.
Applying the Lesson
A compelling example of the importance of seeking counsel can be found in a story shared by Ivanka Trump during an interview with Lex Fridman. She recounted an experience from when she was overseeing the remodeling of a post office building. During the project, they faced significant challenges with the cost of heating and cooling the building’s atrium. When her father, Donald Trump, visited the site, he noticed the struggle and immediately sought input—not just from the top engineers or architects, but from the workers on the ground as well.
As he and Ivanka walked the property, he asked the heating and air guys what they thought about the way they were building the system. One of the workers candidly replied that the design was over-engineered and a more straightforward, more cost-effective solution would suffice. Now, Trump might have been hearing that from the professionals also, and this just provided another level of confirmation. It illustrates a crucial point: this is an example of informal input from someone with a different perspective. It’s a reminder that seeking input from others—whether they are experts or have hands-on experience—can lead to better outcomes.
Conclusion: Embracing Counsel for Financial Success
While it’s natural to feel hesitant about seeking counsel, the benefits far outweigh any perceived drawbacks. By consulting knowledgeable professionals, you can avoid common pitfalls, make better-informed decisions, and ultimately achieve your financial goals more effectively.
At PlanAssist®, we are dedicated to making the process of seeking counsel not only accessible but also empowering. With the right guidance, anyone can navigate the complexities of the financial world and build lasting wealth. Remember, financial success is not just about the decisions you make but also about the advice you seek along the way.
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DISCLOSURE - All written content on this article is for information purposes only. We utilized ChatGPT and other sources for this article. Opinions expressed herein are solely those of Core Wealth Consultants. Material presented is believed to be from reliable sources, however, we make no representations as to its accuracy or completeness. Core Wealth Consultants, LLC a Registered Investment Advisor in the States of Florida, Indiana and Michigan. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Diversification and asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss.
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