Most financial advisors provide their clients with guidance and advice on how to manage their finances. Sometimes, however, the tables get turned and advisors find themselves learning new money lessons from their clients.
What can clients teach professionals about finance? Brenton D. Harrison, CFP and financial advisor at New Money, New Problems, Thomas Kopelman, financial planner and co-founder at AllStreet Wealth and Prince Dykes, managing partner at Royal Financial Investment Group and co-founder at Global Children Financial Literacy Foundation, join GOBankingRates to share some of the most memorable financial lessons they’ve learned through their clients.
Money Is Emotional
Kopelman and Harrison both cited the complicated emotions people have with money as one of the best money lessons clients taught them. Most people think finance is black and white, but Kopelman said this is not always the case. You often learn just how emotional money is simply by working with people and learning about their money stories.
Harrison has worked with clients who grew up in poverty. Some of these clients would make subconscious decisions that increased their likelihood of going back to poverty. Others had fears of losing money. These fears paralyzed them to the point of being unable to accept any financial risk.
“Studies have shown the majority of our views on money are shaped in adolescence,” Harrison said. “We shape these views and establish a comfort zone with money based on what we see, and those views are hard to shake.”
The ways our emotions impact our spending are vast. Harrison said you should not just understand how your emotions impact you, but what your emotional triggers are. By understanding these triggers, you will be better equipped to avoid them at all costs.
Seek a Financial Mentor ASAP
A money lesson Dykes has learned from a client is to get a financial advisor and work with them as early as possible.
Dykes said he had a client who invested in their company’s 401(k) every month for 15 years. While this is the right thing to do for growth, the downside was the 401(k) was investing in U.S. government bonds.
“The US government bonds were earning one to three percent APY while the stock market was in its longest running bull market earning 12.39% annually. A call to a financial advisor could have doubled their returns during this time,” Dykes said.
We’re All Terrible Investors
When the stock market is struggling, Harrison said he gets countless client calls asking if they should pull their money out. When things start going well again, they wait so long to jump back in that by the time they do, the run is over.
“No matter how smart we think we are, the typical person is a terrible investor,” Harrison said.
What can help make someone a better investor is utilizing automated tools. Harrison said this takes the ego out of investing. Utilizing auto-rebalancing, for example, makes sure you sell profitable investments and buy affordable ones at regular intervals.
Enjoy the Journey and the Destination
A few years ago, the husband of a client household, which Harrison served for over a decade, passed away. He was two to three years out from retirement and had planned to take several vacations with his wife as soon as he retired. The couple had put many trips off with the expectation they could experience them later.
Even though his widow was left with plenty of money, she regretted that they’d tried to save every dollar instead of enjoying their money throughout the years. Now, Harrison said he stresses the importance of finding a balance between enjoying the journey of growing wealth and focusing on the destination of being wealthy.
“With the rise of the FIRE movement (Financial Independence, Retire Early), I come across more clients trying to maximize every penny they earn, assuming they’ll be able to enjoy it later,” Harrison said. “Vacations, entertainment, self-care; they’re all things which can add value to your life when done in moderation.”
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