Ever wonder why some leaders avoid taking risks in their roles, and default to status quo? I have a theory about this. I believe that without strong personal financial confidence, every decision, no matter how small, feels risky. Leaders lose the ability and courage to garner budget commitment and innovate.
I see a clear connection between the tolerance for calculated risk and financial confidence. Here is how my theory evolved.
Last summer, our financial adviser of 13 years changed careers, leaving us with “Gary,” a new broker. Initially, Gary seemed very competent. But something was off.
Gary continually pushed for us to invest in a new annuity. During our quarterly financial portfolio review, he and his business partner said they needed 20 minutes to explain its benefits. I interrupted him after three minutes because we had previously told him that we were not interested in that annuity. Gary was incensed, and he nearly hung up on us. We parted company within the week.
That aggressive sales tactic triggered a slew of research and curiosity on my part. Why didn’t that broker act as if he had our best interests at heart? Why was he selling us a product that we clearly rejected?
That’s when my personal financial journey really began. I started by devouring Tony Robbins’ newest book, Unshakeable. I was aghast at how much we were paying in management fees—and how difficult it was to find them in the mutual fund prospectus. I learned the distinctions between brokers and true fiduciaries.
I quickly realized we needed to switch our accounts to a fiduciary (also known as Registered Investment Advisors, or RIAs). Over the next few months, I interviewed 6 fee-based advisors to explore mutual fit. Ultimately, we migrated our portfolio to a registered investment advisor (RIA).
I shared this story with our Marketing Leaders of DC™ and Atlanta community. These peer group members own 100% of the marketing budget for their respective organizations. To my surprise, many of our members asked me about the rapidly changing financial services landscape, and what I had learned from screening so many advisors. Some sheepishly pulled me aside and confessed that they have virtually no clue how their investments are performing—and rarely read a prospectus! In short, they take a laissez-faire attitude around their portfolio.
Is benign financial neglect fueling their fear of failure at work? For some of our members, absolutely. Some were simply paralyzed with making tough decisions, worried about rocking the boat or offending someone.
Here’s what I know, from my own experience: a lack of financial confidence and fluency squelches our ability to make bold moves. Without it, we are constantly facing a fear of being fired—or living big paycheck to big paycheck.
If you are familiar with Abraham Maslow’s Hierarchy of Needs, then you will know that it’s IMPOSSIBLE to be self-actualized if you are in survival mode. First and foremost, you need solid financial footing, shelter, safety, and nourishment. Building your financial planning fluency builds self-confidence. And self-confidence gives you permission to take risks. Risk-taking is an essential quality for innovators.
Now is not the time to fall asleep at the wheel with financial planning. Here’s why: the financial advisory services model has never faced so much disruption, and you need to stay updated on how it affects your portfolio.
These are three trends that are affecting most investors. First, the old-fashioned brokerage houses are rapidly losing talent to Registered Investment Advisors. Second, some mutual funds and insurers still gouge us with hidden fees, creating massive growth for index funds such as Fidelity and Vanguard. And robo-investing has emerged as a legitimate and parallel model.
Jane Barratt, CEO of investment technology firm GoldBean, believes that the lack of financial confidence affects leaders at all levels. “In the last decade, what has surprised me was the complete disconnect between one’s professional standing and their relationship to money. There is no shame to not keeping up with financial terminology. The minute you ask for help, and create a baseline of your current situation, you will feel empowered.” It’s no wonder that Jane’s LinkedIn Learning courses are some of the most viewed programs on financial fluency.
If you are ready to build your financial confidence, start by asking potential advisors these questions. Watch not only for their responses, but how calmly they respond. (remember, “Gary” became very defensive. That’s when it’s time to run for the door.)
- Will you itemize all your fees and expenses in writing?
- What are your professional credentials? (CFA, CPA, CFP, other?)
- Are you always a fiduciary, and will you state that in writing?
- How many clients do you have?
- Do you pay fees to other firms who refer new clients? (“yes” = red flag)
- Do you participate in any sales contests or promotions favoring certain vendors?
- Who on your team is a registered investment advisor (RIA)? Does the firm also have a CPA, an estate planning expert, real estate expert, insurance advisor, and Certified Financial Planner on the team?
- Is the lead person a broker AND an RIA? This is a red flag. It causes conflicts of interest.
- Who is the 3rd party custodian? The advisor should work with an independent outside firm for oversight benefit.
- What additional certifications will you be pursuing in the coming year? With the industry changing so rapidly, only top advisors invest regularly in their development.
It’s time to build your financial muscles and take charge of your career. Your inner innovator is waiting for you to make the next move.
For more of our insights on the connection between financial fluency and leadership confidence, enjoy this 42-minute replay (42 minutes).
Copyright 2018, Lisa Nirell. All rights reserved.
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