You go to your friends for all sorts of advice, from relationships to what restaurant you should go to this weekend. But I’ve noticed a disturbing trend, people are more and more likely to take financial advice from their friends. It’s not that your friend gives bad advice, in fact, their advice might be really great… for them. But what worked for them, may not work for you.
Honestly, it’s really not about your friend at all, it’s about your financial advisor. It’s possible you don’t have an advisor, but if you do, they should be your first call when you have a money question. But this rarely happens.
“One of the hardest things to do is to trust a financial adviser. And although financial advisers know 10,000 times more than you do about money and the financial markets, knowledge isn’t necessarily the gateway to trust. Sometimes we’re more likely to trust our friends and family, who objectively aren’t trained financial advisers, because trust trumps perceived knowledge.” (clip courtesy of the Indy Star)
It takes time to trust someone, but objectively a financial advisor is going to give you better advice because they know your situation. Chances are when your friend gave you advice they didn’t know your checking account balance, your time horizon, or your debt to income ratio. A financial advisor has all the information necessary to create an informed action plan.
The most common financial advice people elicit from friends is investment advice. It’s also the worst type of advice you could ever accept from a non-professional. It’s awesome if your neighbor killed it in the stock market this year, but following the same plan will most likely not reap the same rewards for you. It’s easy to accidentally do well in the stock market, it happens all the time.
“Your friends aren’t trying to be deceitful, they aren’t trying to make money off of you, and they generally (hopefully) want the best for you. You may look up to this advice giver. You may find them to be one of the most intelligent, thoughtful, and disciplined people you know. But unless they know the real math of your financial life, then take advice from professionals who are trained to help you.” (clip courtesy of the Indy Star)
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.