Financial Planning with Mom

Since the dawn of time, all mothers have lived by a certain behavioral code that dictates their thought processes and speech patterns.

Today, in honor of the upcoming Mother’s Day weekend, we’ll be looking at some of those stereotypical statements that moms like to utter, and we’ll apply that wisdom to the financial world…

1) “Because I said so.”

This is one of the more frustrating debate points that your mom could throw at you, because there’s really not an adequate retort to it. You could state your case perfectly, point out all of the illogical aspects of her stance, and finish with a closing argument that would have any jury eating out of your hand.

But then she hits you with “because I said so” and you’re cooked. End of discussion.

Unfortunately, you’ll find some financial advisors who operate with this same “because I said so” mentality. They just want you to go along with what they say because they’re in a position of authority. But unlike Mom, that advisor hasn’t spent your entire life proving that he has your best interest in mind, so that mentality definitely doesn’t fly when it’s coming from him.

I’ve known advisors like this. Their entire business model is based on making clients out of the “low hanging fruit,” which would be the people who don’t ask many questions and just go along with whatever they say. They’re not prepared to truly answer your questions or adequately address any of your concerns. Their mission is to create as many “leads” as possible so that anytime someone poses any sort of intellectual challenge, they can just discard them as a “pain in the butt” and move on to the next person.

An encounter with an advisor like this is ok if you’re someone who does ask a lot of questions. You’ll quickly see that they don’t have the answers you need, and you’ll move on. My concern is for the people who never ask any questions and just go along with the “because I said so” mentality because they assume that they’re working with an authority.

Ask questions. Share concerns. Don’t be intimidated by an authoritative presence.

2) “If you want to act like a child, I’ll start treating you like one.”

Mom usually said this when you were whining about something silly. For instance, maybe you wanted to go on a 4-day road trip with some of your friends, but she wouldn’t let you because you just turned 16 and got your license three weeks ago. But you pitch a fit, so she says, “If you want to act like a child, I’ll start treating you like one and take the car away altogether!”

In the financial world, we see a lot of investors acting like someone of a much younger age. There’s a staggering number of portfolios out there that would be a pretty good fit for an investor in their early 30s. The only problem is that it’s owned by someone in their early 60s—a person who should have a very different risk profile.

The problem here is usually that the portfolio hasn’t been properly adjusted to fit that investor’s stage of life, and it’s often because of a lack of communication between investor and portfolio manager. You assume that your portfolio is being adjusted as you age, and your broker assumes that if you wanted less risk, you’d tell him.

In other words, if you want to act like a child (or a 30-year-old when you’re actually 60), your broker is happy to treat you like one!

3) “If all of your friends jumped off a bridge, would you do it too?”

Literally every mother has said this at some point. I defy you to find one who hasn’t.

Financially speaking, I’m constantly amazed by the number of people who jump off a financial bridge just because all of their friends are doing it.

“Everybody at work says I’m better off to take the bigger pension amount and just invest that extra money instead of taking a smaller amount with a spousal benefit.”

“My brother-in-law says he’s starting his Social Security at 62 because he wants to get his money before the whole system goes belly-up.”

“They say you need a million dollars before you can retire, so I’ll probably be working until I’m 80.”

The “consensus” idea of what’s best may not actually be best for you, so don’t just assume that the herd will lead you in the right direction.

Happy Mother’s Day to all of the moms out there. And remember, “as long as you’re living under her roof, you’ll live by her rules.”