Ep #22: The Problem With Self-Diagnosing Your Financial Life
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Full Transcript:
Benjamin Haas 00:02
Hi everyone and welcome to A/B Conversations where we will help you CFP your way out of it. A podcast where you get into the minds of a couple Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now! Good afternoon, Adam. I'm coming to you from Kutztown, Pennsylvania.
Adam Werner 00:34
And I am coming to you live. I'm sorry, recorded from my home in Exeter, Pennsylvania.
Benjamin Haas 00:42
Yeah, snowy, snowy mess out there. So we are in different locations truly trusting the internet here to record this podcast.
Adam Werner 00:50
I guess to be fair to those that have listened before, it may look like we are in different locales in the past but we are at the time, we were 12 feet apart with a wall separating us. But now we are truly apart using Zoom for its intended purposes and let's hope that the finished product is similar in quality to the rest.
Benjamin Haas 01:12
This is like a behind the scenes episode apparently we’ll tell you all the secrets of how this gets recorded. So you know, this is the Do It Yourself podcast that we're coming clean on and surprise, here's our topic for today. The kind of do it yourself or as we're going to title it: the self-diagnosing that we see with certain people, clients, family and friends of clients, families and friends of ours, many different people, right? There is a do it yourself kind of mode out there on many different things in life. So we want to talk about, is that okay? When would it be okay? And maybe when isn't it? And see what you have to say about that?
Adam Werner 01:57
I'm on board.
Benjamin Haas 01:59
Okay. So I'll start with, you know, a little get it off my chest. I think some of this do it yourself, running your own financial life without any assistance is, in many ways, the fault of our industry and the people that have been giving advice in our industry, right, because so much of it in the past has been about sales. It's been about well, I have the info. I'm credentialed, you're not so you need me, when really, I think our philosophy on investments and that whole financial advising world is a little bit different at this point.
Adam Werner 02:33
Yeah, I think the internet certainly the wide array of information that is now abundant, cheap, and just available. Quick Google search, I can look something up immediately. Just the abundance of information I think gives the power to now the masses to start to share information and sometimes that can be helpful in this scenario where my dryer stops working and I can quit Google Search the part that needs to be replaced and I can take it apart and put it back together. Yeah, I am so thankful to the YouTube gods that I can do that. I don't know that that always necessarily translate fully to financial planning.
Benjamin Haas 03:16
I guess that's the big separation that we need to make today. Right, that investing is supposed to be pretty fundamental. We think it's fundamental, the advice that we give there is fundamental, is there a lot of value in what we do in picking investments? Probably not but when it comes to actual financial planning, right, the risk of getting certain things wrong or not getting certain things done in your financial life. To your point, you're not going to Google how to operate on yourself, right? You're going to go to a very experienced, very credentialed, very well educated Doctor who has been through that operation, how many different times in their life because the risk of you doing that to yourself and getting it wrong. The magnitude is enormous, right, as opposed to crap, I couldn't fix my dryer. Alright, now I'll go pay the service guy or I'll go get that one part. This scale is not the same.
Adam Werner 04:12
So operating on yourself may literally be life or death. For us, financial operations may not be life and death but certainly we see, to your point, the investing side of things we believe is pretty fundamental, stay disciplined, stay diversified. We certainly play that role for our clients to just guide them through that process and keep them keep them on track. That financial planning side is I think, where it's all of the dominoes that can be impacted from any one decision that that experience of having gone through it before, it's very hard to get that level of nuance from a blog post or an article on the internet. You read the Wall Street Journal and you think, well, if this person did it, then should I be doing that exact same thing?
Benjamin Haas 05:04
Let's give some examples, right? Because I think that helps drill down to your whole point because when we talk about comprehensive financial planning, it's acknowledging that all these moving parts have to work as one and if you change one thing, you said it Well, there's going to be a domino effect or something else, right? You want to execute, we had this recent question from somebody who was asking a very specific, should I do this - this stock transfer? And I know we always give the response? Well, it depends. Is there going to be a capital gain involved it? What's your business income going to look like this year? Is it good or bad? He happened to inherit some money last year. So now there's probably going to be more income that he has to deal with. Is there an RMD that needs to be taken from that inheritance? There's so many dominoes to that one decision that you go, should I do this? Yes or no? Man, to your point. There's nothing on the internet that's going to allow you to plug in your specific situation with everything you want to do, let alone figure out what really matters most to you with your goals to say, Yes, good idea or no, bad idea and there's plenty of examples of that.
Adam Werner 06:11
So even better than that, even if there was a free tool on the internet or a paid tool that someone could plug in all their information, be super specific, and have it spit out the answer. I think the problem still remains, and it's, I'm certainly guilty of it in certain areas, too. I don't know what I don't know. So the different variables to input into whatever said software, I may not know all of those for my situation to even get the right output from something like that, if it even existed.
Benjamin Haas 06:47
Yeah, not only do I not know what I don't know, but sometimes it's not knowing what questions to ask. Yeah. Right. So there's the other part of like, when I go to the doctor, I know how I feel; he or she's going to ask me specific questions that are going to help lead to some sort of diagnosis on why I feel that way. It's one thing to not know what you don't know, it's another to not know what questions to ask.
Adam Werner 07:13
Yep.
Benjamin Haas 07:15
I'll tie it back to investments. I think the other problem with kind of just doing it on your own, maybe not investments but just planning in general, money in general, you're probably emotional, you know, about certain decisions that you have to make and we see that not only with investments, and we can talk about last year but maybe somebody passed away, you know, now your emotions are involved in what could be huge financial decisions.
Adam Werner 07:44
That's certainly one of the I don't call it a gray area, but that's one of the more sensitive areas of what we I hope we help people through are those at times of big, large, emotional, potentially emotional decisions, being able to strip some of that away and just be somewhat, I don't want to say cold but more calculated, and actually looking at the holistic picture, taking into account their specific emotions on how they're approaching any one decision that needs to be made but being able to, to separate ourselves from that process. We are, I think it's fair to say we both are incredibly empathetic people but when it comes to making financial planning or investment decisions, it's our job. So we're able to separate mentally from the emotional side of things and be a little bit more data driven and outcome driven. That clearly, in our experience, we've seen people make bad decisions at bad times because emotions just get the best of them. And that, to us, is one of the most, feels like our hands are tied and it's just an awful feeling to have when we know someone is making a decision that's not in their best interest but emotionally, it makes them feel better.
Benjamin Haas 09:08
It is human nature and right, we have to recognize that but as you're explaining that, so well, I'm thinking of this, just in the last week, and you'll know the people I'm talking about, and of course name no names here. I think about the conversation yesterday of well, we have these properties and I don't want to, I'll never sell that house because it was the first one I ever bought, like I saved all my money babysitting to have that house. Well, at some point, we're going to have to tackle this as this maybe isn't the best way to go about it, regardless of your emotional attachment to it. Right? It was, you know, talking to somebody that's unfortunately going through a divorce. You may be emotionally tied to an asset or a way of going about it. That's probably not the best financial use of now what is going to be half of the resources that you're used to having. So there's just any number of situations when people pass away, when it's divorce, relationship dissolution, the first time you went through something, there's too many situations where I think emotions are going to potentially lead someone down a wrong path. So that's another area.
Adam Werner 10:19
It's tangentially related there that more often than not, depending on what the decision is, we've been through it before with clients, right? That's the one side of it and maybe this was on a previous podcast, but it has stuck with me, I saw it in an article somewhere that made the point. Most people are going to make the decision to retire one time. We already have led people through that decision countless numbers of times. So again, we know, just from experience how things go more often than not, and at least have our eyes out for those dark alleys that we want to avoid people going down. So even just leaning on some of that experience, obviously, again, we're somewhat biased in our approach here, it's why we have jobs but there is a lot of value to hiring somebody, whether it's a plumber, somebody to fix my dryer, whatever, that has done it more than once.
Benjamin Haas 11:28
Right and I think that just comes back to the magnitude of those decisions. So I want to pivot to another one that I think sticks with me on the problem of self-diagnosing and I think it goes back a little bit to I don't know what I don't know. There's so many tools out there that I think lead people to believe they're getting some sort of data output that's going to support what they want to do. That may not be well done. Projections matter, but financial planning, especially for the future, we have to make assumptions. And what assumptions are we making? How realistic are they? How do you know these are key parts of what we do that I can't imagine doing any other way than the way that we do through true mathematical modeling, through great tools and through a lot of experience to know what really is a realistic assumption and what isn't?
Adam Werner 12:26
I have nothing to add to that other than I agree.
Benjamin Haas 12:29
Yeah, it's just the you know, the straight line napkin math of Oh, this is what I need so I'll be fine. Yeah, well, again, we know how those things change over time. We know that there are expenses that pop up that people usually don't think about. Are we building in buffers, what is inflation going to look like? What rate of return? Are you kind of assuming which tax rates? Early in the process with us is what assumptions are we comfortable making? And then going back and reevaluating that? I think it's very hard to use one of those online tools that's just straight line time value of money. It's going to mislead people and we see it. Again, I'm just thinking to recent conversations. We see it with Social Security all the time. You don't want to fault the government for what they're doing but they send out these statements, they sure do that, say, at this age, here's what your benefit is going to be. Countless assumptions going into that including how long you're going to work and what you're going to make. So, there's a lot of I think there's a lot of value in having a partner who can be a second set of eyes to the assumptions of the data that you're using.
Adam Werner 13:37
Even if it's not, you know, someone like us completely driving the bus, even if it is to your point that second set of eyes that is just confirming their approach and the path that they are headed down, that they are making these reasonable assumptions, just to make sure that those do fit and are appropriate for their situation.
Benjamin Haas 13:59
What else? Other situations you see?
Adam Werner 14:05
I'm looking at my notes now and I'm laughing because it's, it ultimately comes back to your saying, keep the main thing, the main thing and then the thing I'm laughing about is tripping over dollar bills to pick up nickels. And we said, we certainly see that where I don't want to. I don't want to be pejorative for do it yourselfers, but there certainly is a subset that try to over analyze any one decision and then often trip themselves up and get caught in the minutiae of, you know, the data or the information gathering process before they can even make a decision. Our job, I think is certainly to help reset the focus. Let's keep the main thing the main thing, what are you looking to accomplish? What is the actual goal here, we can help sort through all of the details behind the scenes. But often we see people trip themselves up on getting hung up on small details that in the grand scheme of things, may not be that important to whatever that that big decision ultimately is.
Benjamin Haas 15:12
Or how many times have we seen they're so focused on getting those little details right, that they've forgotten something that we consider so fundamental? They don't have a properly documented estate but they were so focused on getting that estate to millions upon millions of dollars. So again, the scale here, the importance of what they've gotten done, it's just not in balance. They have this, I call it mission drift. What are we really looking to accomplish? What is the main thing? What is the why behind that? And so many people get, I think, when it comes to people that are really goal oriented, they get all the way down into those little goals that really are not completely aligned to what the main thing was to begin with.
Adam Werner 16:00
Well said.
Benjamin Haas 16:02
I think the last one, you kind of brought it up a little bit earlier. Man, it's so easy to read stuff, it's so easy to take somebody's opinion on something and believe that that's going to be good advice for them. Especially in this day and age where news is just at our fingertips and it's meant to solicit a reaction and it's usually pretty good at soliciting a reaction. I can't count the number of times last year, I was just happy to be the person that people called before they did things because they expected us to be the filter and the voice of reason to is this going to be okay. Like the world feels absolutely crazy right now, Is this okay? Because this is what I'm hearing. Right?
Adam Werner 16:46
Yeah, and I'm laughing because the thought I had there was clearly the media. It's they're looking to attract eyeballs but that is their job. That is how they generate revenue, blog posts, articles, whatever. They don't have the responsibility of if you take that information and you act on it in your personal life, there's, you can't go back and sue the Wall Street Journal because you followed an article that was supposed to be general information. We have a responsibility as fiduciaries to give someone the best advice that we can and we are held to that standard and by the way, someone can come back and hold us responsible. So even just going down that road of you're not interacting with a human being if you're just reading an opinion article. And so we had a prospect earlier this week or a client earlier this week that said he was he was researching one particular thing, read an article that said he should do one thing, read another article that said he should do the complete opposite. How does he even make that decision to decide? Well, which one do I follow? How do I know what assumptions are being made in both of these articles to decide which one fits me? And that, I think that's the kudos to him for acknowledging that. Yeah, there's something behind that process. Right, what is in it for that publication? What are they looking to do? Where clearly, if you're working with a professional, hopefully, their job is to give you the advice that is best fit for your particular situation.
Benjamin Haas 18:23
That's all a part of, in my mind, standing next to somebody and putting ourselves in their shoes, right? To stop them from making a knee jerk reaction. Maybe it was about politics, maybe it was the crazy stock market that we dealt with last year. It's not like our phone was ringing off the hook two weeks ago with GameStop. But there is this fear of missing out that people may have when they see something going straight up right there. We need to play that role of standing in between people and their quick decisions or people in what they read and then make taking some sort of action on that. So again, to summarize, it's not to take it away from people that are comfortable being well read, who want to have information education, who want to be able to ask, Well, why should I do that? Right is a good thing. But I think having a credentialed professional when it comes to making big, big, potentially life changing financial decisions, I think it's smart. I mean, I know we're biased but I think it's really smart.
Adam Werner 19:30
The confidence that we would hope someone would get from researching information on their own and even if that's us confirming whether that's correct, or again, just giving more perspective and some professional expertise to help influence whatever that decision is. Clearly, that's what we're here to do.
Benjamin Haas 19:52
We can wrap it up with that. I mean, more than anything, we want to educate people. We want to be a resource in this industry. That is not here to say, here's the one way to do something. Here's the product that everybody should have. It is about education, analysis, aligning things and if you got questions, give us a call because that's what we do. That's right, we are the personal Google. How about that?
Adam Werner 20:21
I don't know about that.
Benjamin Haas 20:23
Personal financial life Google. Is that fair or am I just making it worse?
Adam Werner 20:29
I don't know. I think I think we're making it worse at this point. Turn it off, everybody.
Benjamin Haas 20:34
On that note? Thank you for your time today.
Adam Werner 20:38
Thank you.
Benjamin Haas 20:39
Be careful. That's right.
Adam Werner 20:42
All right. Don't slip on that ice.
Benjamin Haas 20:56
Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in this show are for general information only and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you. Consult with your attorney, your accountant, financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening!
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