118 // Overconfidence: When Your Wealth Advisor Is Wrong

Today we have a topic that may seem odd for me to talk about, which is when advisors are wrong.

So next time you head to your Google search bar and type: financial advisor near me, and you’re meeting with a potential financial planner, you’ll know the red flags from the green.  

I’ve had the experience of being wrong frequently enough, but also of giving advice or responding to what someone wanted, telling them they shouldn’t do what they want or do something that, in the end, was not what they hoped for.

And there are also situations where the client thinks or assumes their wealth advisor is wrong, even though they’re right.

Both situations can be difficult to navigate

The client-advisor relationship is an intimate one.

It’s a sacred place where we step into talking about things clients are most afraid of, their dreams, hopes, vision for their future, and their reality in an exposed truth.

They can hide debt from their friends,

Can hide the fact that they’re not generous with their church,

But when they sit in front of us, we know the truth.

It’s a vulnerable place, and it is in that really intimate, vulnerable place that clients ask us what to do.

This puts us in a position of giving direction, and if we’re wrong, the cost is exceptional.

They blame us and tell us it’s our fault.

We must acknowledge that advisors are human.

A good financial planner will do everything they can as they look across their client base, giving the best wisdom they’ve been able to glean from all those life experiences.

But we will make mistakes.

However, there are financial planners out there who believe they can day trade, that they can outsmart the system-and maybe they can from time to time.

The problem is, when you make a bet that is binary, you are either going to be right or wrong. If you’re having a conversation with a wealth advisor and they’re talking about all the times they were right, whatever it is they did or are doing that are all-in on one area, and they got it right a couple of times in the past…

This behavior yields binary outcomes. 

They are setting you up for failure because they will be wrong.

As advisors, we have to be more aware of our humanity and fallibility so that we never put ourselves in a place where we have the potential to be all wrong.

Clients need to become more aware of that fallibility.

Never allow an advisor’s overconfidence bias to put you in a position where being all right or all wrong is your only outcome.

There should always be some of both: partially right, partially wrong.

Yes, financial advisors are wrong; they will make decisions that don’t work. That’s part of humanity, part of the deal, part of investing.

But if your financial advisor is so overconfident that they believe that it doesn’t apply to them, their ego could be your downfall.

If you’re working with someone that does not recognize their humanness, run.

Be afraid of overconfidence.

Your wealth advisor should build your portfolio with fail saves and protections to ensure the plan still works even if a piece of what we recommend doesn’t work.

Advisors should never bet entire futures of your family on one decision being right.

Because if we bet everything on this and we’re wrong, it’s infinitely more devastating.

I’m willing to miss the moonshot because the bigger goal is to avoid the destruction, even if it’s slower than we might like.

It’s a whole lot more fun to win the lottery, to be suddenly wealthy.

But sudden wealth is not healthy.

There’s an adjustment to wealth.

When you build it over time, you get used to numbers being big and more comfortable handling large numbers. You get used to people needing money from you.

As it grows slowly over time, you get better at being wealthy.

It’s a skill.

When it happens suddenly, that skill set has not developed. Spending frivolously and recklessly is still a part of the equation because it didn’t take long to build it,

So it doesn’t take long to blow it.

Which leads to, a lot of the time, overconfidence.

You believe this sudden wealth was due to your skill, so you look for times to do it again.

I’ve seen sudden wealth disappear for many different reasons. 

I think the weight we carry as financial planners to be right is so heavy, and when we’re wrong, people lose sight of the fact that we’re still moving towards the ultimate goal.

Only when an advisor acknowledges their humanity, doesn’t swing for the fences, and encourages their client to do the same can we be partially right and partially wrong.

And that is a success.

When we acknowledge our tendency to be wrong, we can build a plan to account for the fact that we’ll be wrong.

If it doesn’t cost you anything (sacrifice, savings, time to build it), you lose it quicker than you can imagine.

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