You aren’t your money, but how you spend, invest, maximize and relate to it speaks volumes about who you are and what you care about. Enjoying a healthy relationship with wealth ultimately depends on understanding who you are, why you exist, and where your unique contribution lies. I’ll show you how to focus your energies and your wealth outward, to flourish and become fulfilled.
Here are three ways to get the most out of your financial return on money and life:
Unless there is a very good reason, like your brother-in-law, is your stockbroker, become highly skeptical of any conflicts of interest in your financial advisory relationships. Conflicts of interest will cost you money in the end. Do not begin a relationship with a financial advisor of any type until you understand completely how they get compensated, and where their advice and recommendations potentially conflict with your best interests.
The most common conflicts of interest arise in how services are priced, including charging commissions for buying investment products like stocks, mutual funds, and annuities, and other services like life insurance. They can also be present if the advisor receives incentives from outside vendors for referring and servicing your business. Conflicts of interest may also show up in one-stop-shopping services offered by wealth management firms, such as tax preparation, banking, and insurance services.
Remember: there is no such thing as conflict-free advice, no matter the quality and character of the people you are working with. The best you can do is to minimize the human tendency towards self-interest. When I was a stockbroker in the ’80s, there was a saying, “mutual funds and annuities aren’t bought, they are only sold.” Meaning, most people don’t go looking for many of the products that are available to investors. All other qualifications being equal, the advisor with the lowest number of conflicts, wins.
I am a Chartered Financial Analyst, the highest designation you can get in the money management business. I’ve built investing platforms and managed stocks and bonds for investors for three-plus decades. Over the years, I found we were spending an inordinate amount of time and resources trying to outperform the markets so we could justify our existence (and the fees we charged) to clients.
Unless your name is Warren Buffet, this type of one-dimensional relationship, focused solely on performance, breaks down when savvy clients no longer believe that beating the market is a realistic endeavor. There are many news stories that confirm that attempting to beat the market is a fool’s errand. Vanguard has convinced a generation of investors (myself included) that ruthlessly driving fees and expenses to their lowest level possible creates the best odds of growing and preserving what you worked so hard to earn.
Complexity is the #1 enemy of the wealth creator. An all too frequent blunder I see is the misguided attempt to treat your money like fertilizer, spreading it to multiple accounts and firms, hoping diversification will help you sleep better at night.
In my experience, all that does is create havoc and missed opportunities. What instantly sprouts up is more paperwork and people to deal with, and more details to keep track of. Every new account requires statements, confirmations, tax forms, contact information, opinions about what to do and not to do. When compounded to multiple accounts at multiple firms, this complexity will suck the life out of even the most ardent investor. I’ve witnessed many cases where one investment account is buying the same stock that another one is selling.
More than not, I see investors just throw up their hands in frustration, desperate for someone, anyone to provide a big picture summary of the mess that has accumulated. Pick an advisor you trust, cut the number of accounts and investments down, and start thinking about quality, not quantity. It doesn’t need to be any more difficult than that.
These ideas are just the tip of the iceberg. I’ve recently published a book about maximizing your return on life. To learn more, visit The Wealth Creator’s Playbook: A Guide to Maximizing Your Return on Life and Money.
Originally published on Quora.