Why Millennials Need A Financial Coach

We know all about the financial challenges faced by our generation. The Great Recession took a big bite out of our wages, and its ripple effects will continue to dampen our earnings potential for years to come. Wealth accumulation took an even bigger hit, especially for those burdened by high student debt. We’re are less likely to invest in stocks, or to start a business, and are delaying traditional milestones such as homeownership and marriage.
 Less talked about is the fact that, in spite of these real challenges, millennials have a pretty healthy set of habits and instincts when it comes to money. We exhibit better financial discipline than we’re given credit for; we are appropriately skeptical of authority and financial institutions; we are entrepreneurial in spirit, but cautious about risk; and we value meaning and purpose in addition to material well-being.
 What doesn’t seem to be recognized at all is the untapped potential of combining the two. Take the bad economic hand millennials have been dealt, add in our healthy habits and instincts, and you have the conditions for a real breakthrough.
 Millennials can be the beneficiary of a new, more holistic approach to financial fitness, and to integrating finance into a broader vision of a fulfilled life. But our generation needs help in defining that vision, and in mapping a strategy to get there. And in order for that to happen, they must seek out a progressive financial advisor, one that enlarges their mission, and expands the value they provide to all clients, millennials especially, into non-financial realms.

Money can seem like a cold and impersonal thing, but in fact, your finances are an extremely personal and individual matter, and require a unique and customized approach.

There is no such thing as good “one size fits all” investment strategy. Every investor has different needs, wants and goals in which their financial plan and investment strategy should help fund. Each financial plan should take into account the individuals circumstances and each portfolio should stem from their personality (are they comfortable taking risk? Are they a self-starter who likes doing their own research?) and also from their life goals, and the timeline for those goals. The investment needs of a single person are very different from those of a young couple saving to buy a house in the short-term, to fund their children’s education down the road, and for their own retirement even further down the road.

This is where the value of a good financial advisor can come into play. You will notice that an investment advisor rarely recommends a specific investment strategy to a group of people. If they do, it’s dishonest. While certain basic principles are universal, each individual needs to find a customized plan tailored to his or her unique situation, goals, and comfort levels. Many Millennials might feel overwhelmed by the amount of information and the sheer variety of investment alternatives available, and not know where to start. If that describes you, seeking out a qualified financial advisor to help you sort through the options might be a good first step.

It’s proven that the main determinants of long-term investment performance are not asset allocation or market behavior, but investor behavior.

In a previous article, I argued that investing, is first and foremost, a battle against ourselves and that success isn’t about beating others at their own game but rather beating yourself at your own game.

Most important, perhaps is that when you hire an advisor you’re getting someone to act as a buffer between yourself and your investments: someone to protect you from your own worst mistakes, to help you cultivate and stick to good financial habits. If having the right coach at your side can help you avoid costly mistakes, and help you escape the worst mood swings of the market, a reasonable fee for advice can be a solid investment in itself. Also, some people can sleep better knowing they’ve got some expertise to fall back on.

Some financial advisors are able to create superior returns as well. This is something individuals struggle with. If you do decide to invest your own money note that the greatest danger for the individual investor is overreacting to short-term market fluctuations. The risk in trying to beat the market yourself — as opposed to maintaining a constant, passive investment strategy — is that you’ll misread every short-term dip as a bear; or, within a bear, misread every short-term rally as a sign that the bear is over and a bull has started. And as a consequence you’ll engage in the losing game of overtrading, and of excessively tinkering with your portfolio.

If you do decide to go at it alone, keep your cool and don’t pay too much attention to the daily noise of the financial media. Focus on the big picture, the big questions: Is the market overvalued or undervalued? Is it ruled by greed and excessive optimism, or fear and undue pessimism? Know yourself, and your tendencies. If you’re likely to overreact during difficult markets, use a financial advisor as a kind of buffer to protect yourself from your own worst impulses.

I’m a big believer in the idea of financial fitness, and as a financial advisor I see myself as a coach helping clients get and remain on the path to financial health. I take a very holistic view of financial fitness and of my calling as a financial coach. I encourage clients, and I encourage you the reader, not to separate your financial self from the rest of your life.

When he coached the Los Angeles Lakers, Phil Jackson was famous for handing out books to his players. These were customized reading assignments, sometimes having to do with sports but, just as often, they would be about history or philosophy. His choices sometimes left players and observers scratching their heads. What was he up to?

His point was simply that if they continued to evolve as human beings, they would also evolve and improve as basketball players. Jackson was taking a holistic approach to what it means to be a professional athlete and I think that’s a lesson we can all apply to our own lives — including our financial lives. Cultivating a rich and varied and meaningful life will ultimately make you a better and more motivated investor.

In addition to offering some keen insights into investing, Guy Spier’s book The Education of a Value Investor shares how his personal journey and his financial journey intersected and eventually became one. He confesses that he started out as a “Gordon Gekko wannabe,” but his early success as an investor couldn’t hide an inner emptiness. He relocated from New York to Zurich, devoted himself to value investing instead of swinging for home runs, and became a disciple of Warren Buffett. In return for a donation to Buffett’s favorite charity, he and a friend had a memorable lunch with the great investor, who shared a key piece of advice: “It’s very important always to live your life by an inner scorecard, not an outer scorecard.”

According to those who know him well, these are words Buffett lives by. “I don’t work to collect money,” he says in a recent profile. “I work because I love what I’m doing.” He plans to give away most of his fortune to the Bill and Melinda Gates Foundation, and still lives in the same modest house he bought in 1958 for $31,500. Even at the age of 85, he likes to say he still “tap dances to work.”

As a financial advisor, I obviously realize that money and financial freedom are important. But in the end, you’re likely to be happier, and probably more successful, if you see those things as a means toward an end — if you can develop your own inner scorecard and live by it. A good financial advisor can allow you to focus on that inner score card, while he or she takes care of the rest.