“No need to worry, my accountant handles that” – The Notorious B.I.G
Since I’ve been in practice I have found that a lot of people have the Biggie Smalls viewpoint on money management. This sounds reasonable in theory. Accountants are financial professionals. The clients have confidence in their accountants’ expertise and trust what is being done – often without question.
But what if you have a bad advisor? What if the guidance you are being given is faulty? Even if the advice is good, what happens if the accountant or financial advisor suddenly dies? Do you have any idea what is going on with your finances?
There have been many celebrities who have fallen into this trap. Anyone who trusted Bernie Madoff was in for a rude awakening several years ago. By all reports Terrell Owens was never a big spender (in celebrity terms at least). Unfortunately he was told to make several very ill-advised investments by financial “experts” and ended up playing arena football to try to make ends meet. Nicholas Cage claims that his advisor led him into financial ruin. Since Nic was buying private islands and dinosaur fossils I’m not sure I really believe him completely, but you get the pattern.
Blind faith and the mindless following of anyone are ill-advised. I know that, and you probably do as well.
But we are equally ill-advised to trust ourselves solely to handle matters in which we are not well-informed or educated. And we really should not go it alone when we lack the degree of expertise that is called for to properly navigate the often confusing waters of finance. I am not an investment advisor, but I’ve seen people try to plan their own retirements/trade their own stocks/select their own investments and end up absolutely torching their portfolios – sometimes losing in excess of 80% of the value. And even if their performance isn’t as disastrous as that, they almost always underperform a professionally advised portfolio or unknowingly expose themselves to far more risk than they realize. How costly was it to be “frugal” and “a bargain hunter” and not to pay to get the proper advice in that instance?
And (warning: shameless self-plugging here) I believe this applies to tax planning and business financial advising as well.
As with anything, a balanced approach is ideal. And it’s the one I try to take with my clients. I am there to do the heavy lifting and provide the professional expertise that is so important, but I want them to be informed. I want to educate them, not only on what is happening, but why it is happening. It’s the only way for them to make appropriate decisions regarding their businesses, personal spending, investments, or anything else related to their finances.
If you feel like you aren’t getting enough personal advice regarding your financial situation, give me a call so we can discuss.
Any accounting, business, or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.