Know your emotional biases. Many of my clients are entrepreneurs with bias for control, which means they believe their own direct control of investment decisions will result in a positive outcome. This impulse to control can drive them to try and time the market, resulting in the erosion of investment returns within the portfolio. For the most intense entrepreneurial personalities, the best result is often achieved when the individual finds a fiduciary advisor they trust enough to surrender control of the investment decisions so the entrepreneur can comfortably place their driven focus elsewhere.
As a part of my series about the The 5 Essentials of Smart Investing, I had the pleasure of interviewing Teresa Bailey.
Teresa Bailey is a Wealth Strategist for Waddell & Associates, an SEC-registered investment advisory firm. She orchestrates the financial affairs of executives, entrepreneurs, and other driven individuals. In addition to growing her clients’ financial worlds, Teresa builds the W&A brand through coordinating brand development, client events, and educational content development.
Teresa is a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional and a Certified Divorce Financial Analyst® practitioner.
She was named one of Memphis Business Journal’s Top 40 Under 40 in 2016 and in 2018 began splitting her time between W&A’s Memphis and Nashville offices.
It’s Teresa’s mission to stay involved with her community and speak on the importance of financial planning and connecting industry professionals. She is the former Chair of the Greater Memphis Chapter of the Financial Planning Association (FPA), and previously served on the Economic Club of Memphis Board of Directors. Under the National CFP® Board, she’s an advocate for women entering the field of financial planning. Teresa graduated from the University of Memphis with a Bachelor of Business Administration with an emphasis in corporate finance.
Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
During my college years, I started off as an “undecided” major. Since the tech industry was booming, my first stop was the business school for Management Information Systems. I quickly realized that IT was not my jam.
Inspired to work more closely with my creative side, I moved over to the art school for interior design. There, I quickly learned that I was also not meant to pursue art as a lifelong career. I lacked one very important thing: talent!
When I reunited with the business school after my failed adventure as an artist, I assessed the degree menu with a new approach. I decided that I would find the most useful concentration, no matter what career decision I made after graduating. When I landed in the Accounting and Finance lineup, the lightbulb moment happened for me. My father struggled with financial decisions after my mother passed away in her early forties. They had very little life insurance for her, and he was a traveling salesman now in charge of raising two elementary-age children. I remember vividly the moments he spent at the kitchen table on Sunday afternoon trying to figure out how to financially make it all work in this new life of his. During those trying years, I’d been able to help him out with everything else around the house — but not money matters. And, as a college kid, I still didn’t know a thing about money. That moment landed me in the finance department, and the rest is history!
Can you share with our readers the most interesting or amusing story that occured to you in your career so far? Can you share the lesson or take away you took out of that story?
I’ve always been very grateful that one of the most influential moments in my career happened within the first few months of my role working directly with clients. I took on a project to research cost basis for a gifted stock position owned by a client of my firm. At that point in my career, I knew the definition of cost basis and how things “should” work, so I carefully delivered the news that the client may need to go to the library to figure things out. The next day I was shocked to hear from the lead advisor that the client had requested to no longer work with me because I was “too clinical.”
I learned two very important lessons in that moment. First, my primary role is to make life easier –I should have made the offer to go to the library on behalf of the client rather than giving the project back to her. Second, the relationship you develop with clients is just as important as the work you do.
Are you working on any exciting new projects now? How do you think that will help people?
I’m most excited about my renewed focus to author more content on behavioral finance concepts. For many across the globe, the year 2020 involved countless financial decisions during incredibly emotional moments. An ocean of publications exist for what the rational investor should do with their dollars, but far fewer exist that discuss the very human side of investment decisions.
I hope that individuals reading more about behavioral finance concepts will increase overall awareness that building a healthy balance sheet involves both psychology and math. Also, I believe investors becoming more self-aware about their own impulses, biases, and blind spots will also lead to a greater understanding of the value of forming a working relationship with a holistic wealth strategist, who can act as a behavioral coach in the trying times where an impulse might cause an investor to make an irrational decision.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?
My nine-year-old actually provided the answer to me for this one. I asked her what she thought of the article and her response was that finance is too boring to learn about if it’s not going to be what you do for a living.
Understanding financial concepts is vital to navigating our world, but we do so little in the way of formal education through school years. And, she’s right, It takes a while to understand all of the jargon and concepts, and until you do the spark of interest is hard to stoke.
If you had the power to make a change, what 3 things would you recommend to improve these numbers?
First, second, and third: financial literacy education that begins with elementary-age children. I often work with high wage-earning clients in their thirties and forties who feel shame about how little they know about investing and making informed financial decisions. I also believe it’s rather distressing that we are all required to file and pay income taxes, yet we do not devote any mandatory coursework in high school to the basic concepts of a tax return.
Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing what would you say? Can you please give a story or an example for each.
Well, it’s rather hard to say when any of us stop being adult children, so I’ll go for essentials learned early that can go a long way!
- Know your emotional biases. Many of my clients are entrepreneurs with bias for control, which means they believe their own direct control of investment decisions will result in a positive outcome. This impulse to control can drive them to try and time the market, resulting in the erosion of investment returns within the portfolio. For the most intense entrepreneurial personalities, the best result is often achieved when the individual finds a fiduciary advisor they trust enough to surrender control of the investment decisions so the entrepreneur can comfortably place their driven focus elsewhere.
- Perhaps buying that first house isn’t the best investment decision for your early dollars. I do often see the social norm of a home being the proper first big investment of adulthood result in a delay in individuals beginning to start investment accounts or save into employer retirement plans. Dollars saved and invested in your twenties and early thirties have the benefit of many years of compounding returns before the retirement years. Not to mention, many times the story I hear of the first home purchase involves a “money pit” reference. That definitely doesn’t sound like a great investment return!
- Both your time and focus are currencies for investing. I’ve found that one of the most important traits shared by wealthy individuals is an intentional decision to devote time every week to focus on financial health. We’ve all been trained by the P.E. classes of our childhood that in order to remain physically fit, we must remain active every week. The same principle applies to financial health. Dedicated focus and attention yield the greatest results.
- Pay attention to your triggers for bad behavior. During our weeks of isolation in early 2020, I learned of one of my own triggers. My restaurant delivery expenses increased dramatically, which I expected. The data out there now shows that I was not alone! Additionally, my overall online purchases for everything else were also much larger than I anticipated. What was the correlation? Waiting for the food to arrive. Each night that I didn’t feel like cooking, I’d open my personal laptop, order dinner, and then meander around the internet until the food arrived — I’m a sucker for a great ad. Where did that most often lead me…? And the bottom line for my balance sheet? Dollars spent on random internet purchases are dollars lost forever from my investment account.
- Don’t phone a friend. One of my least favorite phrases to hear is, “This buddy of mine said that he’s trading his own account and made a bunch of money on…” People love to share their success. People do not love to share their failures. Within the professional investment industry, there is a very serious ethical and regulatory importance placed on clearly communicating the whole return story of an investment portfolio, and for a reason! Your buddy is free to only tell you about his success stories. He can keep his losses a secret!
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
One of my dearest professional relationships and mentors is a Licensed Clinical Social Worker, Betsy Mandel-Carley. Betsy entered the field of psychology in 1968 and focused her practice on the impact of family of origin dynamics, decisions persons make in and out of awareness, social change, and ultimately how these affect the ways we connect and couple. During our farewell chat once Betsy retired from her practice, we reflected on our decade of behavioral discussions. Her experience and field of study added tremendous value to my world of helping families navigate their own understanding and approach to money matters. I cannot imagine my career without the infusion of Betsy’s behavioral wisdom.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
My favorite quote for my business life is from Dwight D. Eisenhower: “In preparing for battle, I have always found that plans are useless, but planning is indispensable.”
Every day, when I sit down at my desk with my cup of coffee, I’m preparing for battle on behalf of each one of my clients. The enemies change. The needs are fluid. Marriages start. Marriages end. Babies are born. Parents pass away. Jobs are gained and jobs are lost. Businesses begin, scale, sell, and implode. Presidents come and go. Investment account balances go up and they go down. Meanwhile, everyone has a little bit of battle and chaos of their own.
The process of periodically outlining a plan with each individual is absolutely priceless. We learn together what is most important, the fears that keep them awake at night, and most importantly the “why.” Why are they hard at work every day — in other words, what are they building toward? The process helps identify the most important pieces of each plan that I am entrusted (and honored) to protect in battle.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂
I would love to see a movement to remove the stigma and shame around a lack of knowledge and confidence in personal finance, especially with women! Recent studies show that women will soon become decision-makers for the bulk of the liquid investment assets in the United States. Now is the time to collectively let go of the embarrassment and begin the learning process, for the good of the entire nation!
Thank you for the interview. We wish you continued success!