The world is full of people telling you what to do with your money, whether it is a stranger in a bar, a well-meaning colleague at work, or a hard-sell merchant in a television advertisement. But before you act on any of these recommendations it always makes sense to seek out a second opinion, preferably from a professional financial planner who takes account of your circumstances and particular goals.
Reason #5: You need a second opinion
People diagnosed with a life-threatening illness like cancer and urged by a medical specialist to adopt a controversial and financially ruinous treatment tend not to think twice before seeking out a second opinion.
And why not? There is often so much at stake. The difference in outcome between one treatment option and another could equate to years of additional life. Even aside from the longevity issue, patents have to juggle significant differences in potential side effects, hospitalisation versus home care and, inevitably, financial costs.
While not as existential as a health crisis, financial challenges and the variance in potential outcomes from taking one course over another mean that seeking a second opinion from a professional planner is often the best investment you can make.
Of course, anyone who has faced a major financial decision will tell you there is rarely a shortage of unprompted and unsolicited advice from friends, family and acquaintances. Suddenly, everyone is expert and they all know the unique formula for success.
There will be the fellow on the bar stool opposite you who has made a fortune in Bitcoin and reckons you should have a punt. Or there’ll be the woman at work who says she saved a fortune by cancelling the family’s health insurance. And there is always the brother-in-law who bought the hype over mini-bonds marketed to retail investors as high return and low risk and suggests you would be mad not to give them a go.
But it’s not just enthusiastic amateurs pushing doubtful financial decisions. Even now, there are supposed professional ‘advisers’ who recommend to clients inappropriate investments that are tainted by undisclosed conflicts of interest.
In all these examples, the best response is to resist instant decisions, do your homework and, most importantly, seek out a second opinion – preferably an adviser qualified to deal with the particular issues you are facing.
(In the UK, the Financial Conduct Authority has an online register of authorised advisers and the areas they are allowed to advise on.)
The right starting point
If it is worthwhile, a second opinion will not start with recommended strategies and product options, but with an understanding of your particular financial situation, needs, family and business circumstances, clearly defined goals and risk preferences.
If choices are to be made, it is good to know what your available options are, but these often do not become evident until an adviser has got a clear grasp of your situation.
Another advantage of talking to a professional adviser is they do not have an emotional stake in your decision. They have a wider frame of reference than friends, family and colleagues, and can help you coolly weigh the pros and cons of alternative approaches without prejudice.
More importantly, they are not looking at a single aspect of your financial life, but seeing how the various elements fit together, from your financial goals to your net worth, cash flow, budgeting, debt management, retirement plan, insurance and estate plan.
A good second opinion will always begin with the words “It depends”. Instead of foisting a quick investment solution on you, an adviser will tell you that it depends on what your risk appetite is; it depends on your cashflow requirements; it depends on your special needs around family, education, retirement, health and myriad other issues.
The second opinion emerges from an exhaustive discovery process, a clear definition of your goals and, finally, a plan. This isn’t a “I reckon” opinion issued from someone perched on a bar stool, but a professional and considered view grounded in who you are, your values, your circumstances, and your life aspirations.
A clearer picture of you
Even if you don’t go down the full financial plan route, it can help to know that you have other options beyond the one offered to you in the first place. It can also help you to reflect on what the real problem is. For instance, perhaps it’s not so much about money but about creating some more space in your life and improving your overall wellbeing.
The world is full of people offering us instant answers without seeking clarity about the problem each individual is seeking to solve. Many of these opinions fall short because they do not take into account the infinite variations in our lives.
Ultimately, the best second opinions don’t so much give you a clearer picture of the solution being offered, but a clearer picture of yourself.
That can be priceless.
Missed the first four parts in this series? You can catch up here:
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