Quite often, when people write to me asking for specific financial advice, I respond to them encouraging them either to seek a lawyer or a financial advisor, but I also make a point to tell them to lay all of their cards on the table for this advisor.
Some readers have expressed surprise at this response. Either they seem shocked that I wouldn’t simply give them an answer to their question, or they seem almost insulted that I would somehow imply that they weren’t being forthright about their situation.
There are multiple things at work here.
First, most personal finance solutions aren’t as simple and one dimensional as one might think at first. There are many, many factors that are in play when one tries to determine the best move for their situation: age, health, psychology, current financial state, current employment state, goals, future plans, ongoing relationships – even things as mundane as the amount of free time one has.
As a result, many situations simply don’t have a simple off-the-cuff answer. It’s quite likely that, in a short telling of your story, you’re leaving out some key information, intentionally or otherwise.
Second, I’m not an expert. While I’ve read a ton about personal finance and have actively applied that to my own life (which is what I write about here), I have very little experience taking that same knowledge and applying it to other situations. I think there’s value in sharing my own experiences – and I do believe that others can take home lessons from those experiences – but, frankly, I’m not trained in the nuances of evaluating the experiences of others. All I can share is my experience and the lessons that have come from that.
So, what’s the solution if you do need an answer to a financial question?
First of all, it is reasonable to write your situation in detail. It’s similar to the reason that people journal – quite often, simply recounting and describing your own experience and situation can open up your own mind to revealing the correct answer.
I honestly believe that this is the biggest reason people write to me. They simply need to write it all out, and once they’ve done that, they want to share it all with someone – but not with someone they know personally.
Don’t overlook things, either. No matter what the situation, you should include all the basics – your current financial situation, your health, your goals for the future, even the amount of time you have to seek new solutions. Every significant factor in your life is important for solving financial problems.
Often, just this process alone – writing everything out – will reveal the answers you need. I know that quite often I find the answers I’m seeking while writing a post for The Simple Dollar. I’ll start an article about my own situation, turn the pieces over and over in my mind, do some additional research, and by the end of the article, it’s clear to me where I should be going with things.
What if the answer isn’t obvious? Your best first step is to talk to someone you personally trust, but it must be someone that you’re willing to lay out all of the facts to or else talking will get you nowhere. You must be willing to open the books to this person in order to really tap their wisdom.
In many situations, this can be the best approach, as the person you trust likely has some insights into your personality that no advisor could bring to the table.
Of course, there are many situations where this isn’t appropriate, either. Such personal advice mostly works best when figuring out general plans, not specific investment choices. Once you get down to the specifics of financial choices or legal options, you should turn to a financial advisor or a lawyer. Here are a few tips for finding a good one.
First, you should always retain the final decision in any situation. You are hiring these people for their expertise to help you make the right decision, not to hand them the responsibility. That responsibility still rests with you and it always should. Never give full autonomy to an advisor to make choices for you. Instead, if they give you an explanation you don’t understand, ask them to explain it better. You’re paying them to provide you with their expertise, not provide you with more confusion.
Second, if you’re seeking a financial advisor, look for a fee-only advisor. A fee-based or commission-based advisor both have other interests that they bring to the table – namely, they want you to invest in whatever investment they can earn a big commission on, and that’s often not the best investment for you. Instead, seek out advisors that operate based only on fees – they may be a bit more costly up front, but you can be sure that they’re not trying to sell you a product. For your fee, what you get is their best advice, unhindered by the need to shill for a product.
Third, hit up your personal network for recommendations for both lawyers and financial advisors. This goes both for positive and negative (stay away from…) recommendations. You’ll often be surprised at the responses you get from friends and relatives you trust when you ask them for suggestions on lawyers and financial advisors – they may offer strong (and accurate) recommendations that you didn’t expect.
Finally, do not hide key information during this process. I know quite well that it’s tempting – usually out of personal pride – to hide key painful pieces of information when asking for advice. Don’t. Provide all of the painful information up front, and be an open book for additional questions. Don’t. Hide. Anything.
In the end, make sure the advice passes your smell test. Do your own investigation into the advice you get and make sure that it does make sense, no matter what the source. Multiple sources for your information are always good.