Have you ever been to the doctor and not followed their advice?
Perhaps they told you to quit smoking, avoid certain foods, or take up a new exercise regimen.
Perhaps you tried to follow their advice, but change is hard, so you fall back into your old ways and the next time you see them, your health hasn’t improved. Maybe it’s even gotten a little worse.
Who is responsible for such an outcome? The patient or the doctor? Should the patient stop seeing the doctor or neglect to consult them any longer?
Why pay for advice and not take it?
One could argue that seeing a doctor is pointless if we don’t follow their advice, and they’d be mostly right: Staying away from the doctor or refusing to consult them doesn’t help our health one bit.
The same is true of wealth advice, of course.
If we see a competent wealth adviser but don’t listen carefully to what they recommend, if we refuse to implement the solutions that they provide, or if we choose to ignore the advice that they give us, we’re not likely to get the results that we’re looking for.
Why would we expect anything else?
A cautionary tale
I once had a client who wanted to invest about $1 million dollars. He was in his late 30s, and despite multiple conversations, really didn’t have much in the way of goals for his money. So, we decided to put that purpose-seeking exercise aside just for the moment and focus on just putting his money to work in a reliable manner.
After assessing his risk profile and financial health, we planned to invest his money in a balanced portfolio that was 60% equities and 40% fixed income (bonds) for the medium term of at least 8 years. We also decided to do it in 10 monthly tranches of $100,000 each to avoid the possible regret of having put all of it into the markets at once and seeing its value dip significantly in the near term.
Although when we got started it all seemed to go well, it was severely short-lived.
Despite efforts to educate and prepare him, after a couple of months, when faced with volatile markets, he called me and asked to sell his investments. He told me that he had been reading articles and watching videos about an impending global economic implosion, the supposed end of fiat currencies and that the only place money would be safe was in gold, land or bitcoin.
I sprang into action in attempts to allay his fears, quell his doubts, and reemphasise what works in investing and why we recommend what we do.
Thankfully, I managed to talk him out of selling his entire portfolio, and into temporarily pausing his monthly tranches instead, so that he wouldn’t lock in his losses. Later, I also managed to ease him into starting again, albeit at a slower pace. In that way, he would also be able to continue taking advantage of the depressed stock and bond prices.
When the markets continued to descend, he tried again to liquidate his investments. This time, it was all I could to have him sell only $100k out of about $600k he had put in by that point, rather than all of what was invested. And it took even more nudging to get him to begin again after that.
More recently, in 2023, we found ourselves riding a new bull market. And while Providend portfolios, like the markets, have not fully recovered all that was lost in the prior bear market, we seem to be well on the way (fingers crossed).
This same client told me not too long ago that he wants to take his money and go back to DIY investing instead because he feels that it is cheaper and that he can invest effectively on his own with ETFs and a little discipline.
He also questioned why he is still making a loss on his portfolio despite the unexpectedly good returns in recent months, ignoring the fact that markets are still not where they were before.
He did both while seeming to forget that he chose to sell his investments at one of the financial market’s lowest points in the last couple of years—against advice—and would have done even worse had he sold all of it.
Who is to blame?
I don’t share this to shame or belittle him. In fact, as his adviser, I must shoulder at least some of the blame.
If someone were to say that seeing a doctor is pointless unless you’re a compliant patient, they would be mostly right—but not completely.
It is also the doctor’s job to explain the situation in a way that the patient understands and ensure medical compliance on the patient’s part, largely through having the right bedside manners, building trust, and motivating them to take the correct actions.
Wealth advisers should do the same. We need to have the right skills that enable us to engage clients effectively and keep them in their seats during the ride.
Despite this, there really is only so much we can do, and sometimes we meet clients who are just not ready to listen. It’s a curious thing when someone pays us for advice and simply doesn’t take it up.
Suffice to say, I am saddened not only by what has transpired and the outcome of these events, but also by the occasional blindness of such clients to the value we bring them, particularly if they listen.
This is an original article written by Bryan Chan, Client Adviser at Providend, the first fee-only wealth advisory firm in Southeast Asia and a leading wealth advisory firm in Asia.
For more related resources, check out:
1. Providend’s Money Wisdom Podcast S2E13: Is Wealth Advice Worth Paying For
2. Should I Get Professional Wealth Advice?
3. Complex vs Simple Wealth Solutions
We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.
