Move Further from Your Investments and Closer to Your Advisor

The whole financial picture

Please note the publish date of this blog. Financial information, market conditions, and other data mentioned in this post may no longer be accurate or relevant.

I admit it: I have a fear of intimacy…with my investments. From what I’ve observed, investors make some of their biggest financial mistakes when they get emotionally attached to their investments. My suggestion is to try creating some distance from your investments and instead get closer to your advisor. Here are some reasons why this is a smart strategy.

Lessons from Julie Rental and Bob Stock

Julie Rental has been renting out a house in LA for over 10 years, and hasn’t once raised the rent. When I asked her, “why?” she replied that it’s because her tenant is very nice and always pays the rent on time. Julie doesn’t need the extra rent to maintain her lifestyle, but her emotional decision to give up income that she could receive will ultimately result in a smaller inheritance for her heirs and favorite charities.

Next we have Bob Stock, who had more than 30% of his net worth concentrated in stock and options of the business from which he recently retired. Since he gave more than 20 years of his life to the company, selling the stock was the final emotional farewell to a major life chapter filled with fond memories. After several discussions, and a lot of prodding, Bob agreed to sell some of the stock, but a year later, he’s still struggling to let go of the significant amount that remains.

Avoid Intimacy Interference

Here are some strategies to help avoid an intimate connection to your investments:

  1. If you want to own real estate, do so as a limited partner or through a mutual fund. If you insist on owning buildings directly, hire a professional management company to assist you.
  2. Don’t hire a financial advisor who is a close friend or family member unless he or she is a fiduciary. This will greatly reduce the potential for conflicts of interest and the chance you’ll be sold a commission-based product you don’t need (a fiduciary has a legal obligation to act in the best interest of a client).
  3. If you want to keep a small portion of your investable assets in individual publicly traded stocks, avoid buying companies that you use regularly or that personally excite you (I’m talking to you, Apple stock owners). You will fail at creating a system for when to sell or rebalance.

Get Closer to Your Advisor

As you drift further away from your investments, try getting closer to your advisor. The relationships where I feel that I’ve added the most value are the ones where the client trusts me completely. They share intimate details about their health and their family, and disclose every dollar of their net worth (i.e. there’s no secret account or stash of surplus cash in the bank). This kind of openness means that the advice I give is based on full and accurate information.

I’ll confess something. Even though it’s a tradition at Abacus that each of our advisors has a financial advisor, I only recently started working with an advisor for my own financial situation. I finally recently surrendered because I felt I would benefit from another perspective as I move towards buying a house in the Santa Monica area. It’s been life changing, as I knew what I was supposed to be doing to prepare for this life change, but I wasn’t doing it. I’m doing it now.

Happy planning,



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