Inertia is a powerful thing. Especially when it comes to your personal finances. Even if you know rationally that you could benefit from some financial guidance, it’s easy to kick the can down the road by telling yourself you’ll deal with it later. In fact, there are two particularly challenging types of financial inertia that I hear from many people. I like to call them Getting Started Inertia and Long-Time Advisor Inertia.
Getting Started Inertia is the all-too-common experience felt by many people who are not yet working with an advisor, but know they probably should be. Common sentiments often cluster in one of two areas:
Concern 1: “I’m really busy right now; I think I’ll just revisit this when things settle down.”
Often people feel like they want to wait to engage an advisor until they’ve met certain life milestones. But much like taking a vacation or having a baby, there’s seldom a “perfect” time to engage an advisor. Getting started early will enable you to get ahead of any big financial decisions on the horizon, and put in place a strategy that can set you up for success from the get-go. Why is this so important? Because you want to understand the long-term impact of financial decisions before you make them, not after.
For example, you may be in the middle of a job search and thinking that once that’s completed you’ll find an advisor. While engaging an advisor upon the start of a new job can be a great idea, there can be substantial benefits to working with an advisor even before then. In particular, an advisor can help you evaluate the potential value of any stock-based compensation that may be part of a new job offer, or help you transition a 401(k) account from your former employer.
Ultimately, the problem with waiting is that people rarely experience a lull. Instead, they tend to cycle between focusing most of their time on finding a new job, mastering their new role, and personal/family life. Over time this cycle repeats, and far too often planning to wait 3 to 6 months leads to delay until being prompted by an urgent need.
Concern 2: “Can’t I do this myself? Is it really worth the cost?”
When working with an advisor for the first time, it can be difficult to truly understand the value of the service. After all, you’ve managed your money up until this point, so how do you wrap your head around paying someone to do that same job?
The reality is that a strong financial advisor that’s worth the money should be trained in investment strategy and financial planning. (If they’re not – keep looking!) This type of advisor will be able to provide far more time and attention to managing your portfolio and helping you establish your financial plan than you could do on your own. They will also have access to professional-grade financial planning software, and can provide a broad array of investment vehicles.
A smart investment strategy isn’t just “one and done.” It’s an ongoing process that requires constant care. And while at first that may seem like something you can do in your free time, finding time to develop an investment strategy after work or implement trades during working hours isn’t easy.
Long-Time Advisor Inertia is the sense of complacency that many people who have been working with the same advisor for a long time feel. Often times they feel they aren’t getting the level of service, support, or guidance that they want and deserve, but taking the steps to “break up” with a current advisor and find a suitable new one feels too daunting. As a result, they end up staying in a lackluster advisory relationship for too long, at the expense of their own financial situation and satisfaction.
If you identify with any of the following statements, then you may be experiencing Long-Term Advisor Inertia:
“I have an advisor, but I don’t feel like I understand what they’re doing or why.”
“I meet with my advisor only once per year. Do they really know what I need?”
“When I describe the things I like best about my advisor, it’s generally about their hours or something personal about them, rather than what they’ve helped me achieve.”
“I have a hard time describing how my advisor has helped me recently.”
Don’t let your advisor go on auto-pilot. If you don’t feel as though your financial advisor is actively working to help you achieve your financial goals, or if you’re not able to describe how he/she is helping you understand your financial situation, then it’s worth trying to shift that inertia.
Overcoming Inertia
So why is it so important to overcome financial inertia? It’s essential because by delaying taking steps to ensure your financial plan is working for you, you’re ultimately just forcing your financial assets (and yourself) to work harder later down the line.
The best way to overcome both types of financial inertia is to take the small step of getting a second opinion on your portfolio. Paceline offers a complimentary portfolio review so you can get an unbiased view about whether your portfolio is in need of some TLC.
This blog was written by Jeremy Bohne, Principal & Founder of Paceline Wealth Management. Paceline is a fee-only investment advisor serving clients in the Boston area, and on a remote basis throughout the country. Paceline specializes in helping tech and biotech executives, physicians, and those seeking financial planning services.