How to Find a Financial Advisor: An Expert Tale

Posted by Carlos Sera on Aug 14, 2015 10:54:27 AM

27087050_sThis tale speaks to the word expert and was told to me by my father.  In  we learned that we are ultimately responsible for our own financial health.  I like to say this makes us all responsible for our own financial ship and we must utilize the services of advisors, act as do-it-yourselfers or implement some combination of the two.  We further learned that there is a small group of do-it-yourselfers that manage their own affairs because they are convinced that they can do a better job than an advisor.  These people act as their own advisors.  They get their information from various sources have what they consider a good grasp of financial matters and are quite content to make their own tax, asset allocation and investment decisions.  In most cases they are completely incorrect as study after study shows.  However, they persist.  To see how wrong these people can be in terms of investment management alone read .

This tale addresses the issue of expertise from the perspective of the medical field.  It’s purpose is to illustrate just how easy it is to get lulled into a false sense of security when it comes to expertise and also to illustrate how much effort is truly necessary to earn the designation expert.  The parallels between this tale and the do-it-yourselfer are striking.

My father was a board certified OB/GYN which is the highest professional designation that a physician in his field can attain.  By all standards of that time he was considered an expert. The tale is simple but eloquent in its message.

It seems that one of my father’s patients was in labor.  We’ll call her Brenda.  She was in a top US hospital and she had the best technology and skilled attendants at her disposal.   She was delivering her first child, the labor was progressing smoothly and Brenda and my father were passing the time in between contractions by making small talk.  Brenda was a long time patient and would kid my father and tell him that she was doing all the work yet he was the one getting paid.  He would kid her back and this went on for a few hours.

Then the unexpected happened.  My father stepped out of the room to see other patients and a few minutes later Brenda’s attending and skilled nurse came running to my father telling him that Brenda’s blood pressure had suddenly begun to drop and that he better hurry back to Brenda’s room.  My dad did just that and when he arrived he told the skilled attendants as well as Brenda “Turn Around.”  As he likes to tell the story, these two simple words in a time of crisis were the difference between life and death.

What had happened to Brenda?  It seems that a very small percentage of women will develop what is called Vena Cava Syndrome when in labor.  In this syndrome the blood flow through the vena cava is restricted and results in a blood pressure change.  It’s a mechanical process that if you know about it the two magic words can save a life.  The change in blood pressure once the patient turns over is almost immediate and in Brenda’s case she was back to herself in no time at all.  However, she was no longer joking with my father about her doing all the work.  Brenda immediately recognized the value of expertise.

A few weeks later at the follow-up visit my father, Brenda and a beautiful baby girl had a chance to discuss the events of her labor and delve a little deeper into just exactly what the meaning of expertise means to a patient.  As my father likes to point out, women have been having babies without the help of a board certified OB/GYN forever and in most parts of the world mothers are still giving birth without this expert assistance.  So why hire an expert? One of my father’s many self-evident sayings is “people don’t need help until they need help.”  In the case of women giving birth it has been his experience that expert assistance is needed less than 5% of the time.  However, as he likes to point out using his common sense Cuban math, “Unfortunately, if you happen to be that 5% it represents 100% of the time to you.”  The more they discussed the situation the more that Brenda came to understand that the reason highly trained physicians are paid to do what appears to be nothing is the years they invested learning what to do when the unexpected happens.  As my father likes to say, a true expert gets paid not only for his knowledge but more importantly for his conviction.  Thus is the case for hiring experts.  You hire experts to assist you through the infrequent times.

How does this relate to hiring a financial advisor vs. the do-it-yourselfer?  I think most people know the answer by now, but let me spell it out.  Just like most women have been having babies forever without complications, anyone that can read and has access to the internet can find out what the best performing this or that investment has been for the last year or three or five.  See .  Additionally, there are countless newsletters, pundits and advisory services that all profess to be the very best.  Information is everywhere but knowledge, expertise, common sense, wisdom and conviction are rare commodities.  To make things worse for the average investor, there isn’t a mutual fund family or major financial institution that doesn’t have on their web site a do it yourself section where one can calculate the best mortgageplan for college, develop an asset allocation model or recommend a target mutual fund that doesn’t just seem perfect for their situation.  Even worse, just like the skilled nurse that didn’t know the 2 magic words since she wasn’t an expert, there are countless skilled advisors posing asexpert advisors.  So you can see how in a time of crisis, this leaves the individual investor without a true guiding hand.  See  for a better understanding of the types of advisors in the marketplace and see  for ways to differentiate the skilled advisor from the expert advisor.  You don’t want to hire skilled advisors; you want to hire expert advisors.

What makes this problem so insidious is that it’s very easy to lull yourself into thinking that you actually have an expert on your payroll or to think that you can save a fee or commission by doing it yourself.  It’s my experience that for the individual investor they couldn’t be more wrong.  These individuals are lured into a false sense of confidence by the fact that most of the time they can in my opinion do about as well as an expert advisor, but it’s that other percentage of the time that kills their financial plan as surely as Brenda or her baby might have died without an expert by their side.  Expert advisors are thus not paid for the portfolios they construct or the advice that they give, they are paid for the conviction that the portfolios they construct will perform according to the client’s objectives and that their advice is time tested with real people.  Most importantly expert advisors are paid for the years they have spent learning to reprogram their investment circuitry so that they don’t buy high and sell low like the typical investor.  They learn to be aggressive when others are fearful and fearful when others are aggressive.  In this regard, advisors are made and not born.  I know that it took me many years and many financial losses to reprogram my thinking.

The world book dictionary defines an expert as- a very skillful person; a person who knows a great deal about some special thing; authority; specialist.  Furthermore, they use the words proficient and skilled as synonyms for the word expert but they are quick to point out the subtle differences between the three words.  They wouldn’t want to confuse people into thinking that just because one is skilled at something that they are proficient and that just because one is proficient at something doesn’t mean they are an expert.

As is the case with Brenda, she was skilled at giving birth implying she knew how to do it and the attending nurse was proficient.  But neither was an expert.  Expertise implies having mastery or unusual ability as the result of experience in addition to training and practice.   Lastly, the same dictionary uses the words novice, beginner and amateur as antonyms for the words expert.  What can we learn from this bit of word play?  Simply the following, in a crisis there is a major difference between someone that is an expert and a non-expert.  It doesn’t matter if you are skilled or proficient. It is just not sufficient.  For all practical purposes you are no better off than the novice, beginner or amateur.  I suggest that given the fact that most people won’t attain expert status when it comes to money and since most people will find themselves invested in financial markets that are under some stage of extreme fear or greed at multiple points in their life that they hire an expert and pursue individual satisfaction in other areas of their lives.


Topics: Investing Tales