Thursday, February 07, 2008

Your Money; Your Responsibility

I love this image--and its relevancy to this post will become apparent soon.

The metaphor that I use in governing my financial assets is that I'm the CEO of my portfolio. As CEO, I make the decisions and for good or naught I accept responsibility for those decisions. While I'm not beholden to a board or shareholders, I am beholden to my future financial security. So it is a big responsibility.

CEO's do not operate in a vacuum though. So the image to the left shouldn't conjure up a concept of how one goes about ACQUIRING information, but rather it should conjure up the image of the responsibility for decisions.

CEO's surround themselves with experts who provide them with sound advice--that have expertise beyond what the CEO has. But even with expertise, the CEO must be able to weigh the quality of the advice against the magnitude of the decision that is under consideration.

I'm finding through this market turmoil that there are sound voices on whom we can rely to give us trusted guidance. Jeffrey Saut, George Dagnino, Bill Cara, James DePorre (the REV on Real Money), Gary Kaltbaum, and John Hussman have been consistent in their counsel about the dangers of the market. Some have been more constructive on not being overly anticipatory of such dangers than others. Further, this group has been consistently honest in assessing the quality of their guidance and sharing with their audience when they've experienced a turnabout of their opinion.

Regardless of the quality of experts with whom one surrounds oneself, one still has to have a grasp of the business risks. An attorney can draft wonderful contract language, but it is unlikely that s/he will have the comprehensive understanding of what can go wrong with the deal outside of the normal clauses that one sees in contracts. Your insurance professional can give you a wonderful package--great rates, great coverage--but there could be some business risks that you've not shared with her that you are not covered for. You need to think about your risks--all the things that can go wrong, and ensure that you are adequately protected. You'd be surprised how many people do not understand that. The CEO needs to think about those things or ensure that someone else has.

You cannot cede responsibility for thinking about YOUR business (financial, personal, health) risks. While it is tempting to think that the professionals that we see in the media somehow have our best interests at heart, they do not. They are entertainers. They are talking their book. They are dispensing advice that is so generic it would be almost impossible to address YOUR situation. There are wonderful financial services professionals that will sell you all manner of product. Make sure that your advisor is both a professional and independent--securing an indepent Certified Financial Planner rather than using an American Express Financial planner, or an AXA or a Genworth. Their goal is to sell you their products.

Do not go about your decision making process alone. However, do understand that, like the lone figure in the beautiful painting, the responsibility for the consequences of decisions that you make, are incontrovertibly yours alone.

Therefore......
  • choose your advisors carefully
  • evaluate their motivations & their track record
  • understand your risks--educate yourself to have a reasonable command of the issues at hand.
  • evaluate your own performance.

2 comments:

GemmaStar said...

Great commentary!

~ Nona said...

Boy! That image says it all. There one is, all by one's self....