Is your financial planner’s job to help you do what you want to do—or to talk you out of it? The short answer to that question is, “Yes.” Or possibly, “It depends.”
As I’ve written before, probably often enough so people are tired of reading it, if you consult a fee-only financial planner you are a client rather than a customer. The planner’s loyalty and fiduciary responsibility is to you rather than to a company selling investments, and the planner’s job is to act in your best interest.
There are two aspects to that responsibility. One is to find ways to help you do what you want to do. The second is to steer you away from actions that would jeopardize your financial success or security. In doing both of those, however, a wise planner will be careful not to let his or her own biases and beliefs get in the way of your goals.
Suppose you and your spouse came to me with your long-held dream of living on a piece of land out in the country. You want the privacy, the views, the chance to have horses, and the peace and quiet. You realize that buying some land and building your dream house on it will be a major project. You’ve decided you can do it if you use half of the money you have saved for retirement. That will pay for about half the cost of the property and building, which means you can comfortably afford a mortgage on the rest. You also figure that the value of the property will increase enough over the years to make it an asset rather than a liability by the time you retire.
Personally, I’d like living in the country about as much as I’d like eating cheap frozen dinners every day. I’d hate the commuting, the need to plow my own driveway, and the chances of being snowed in for days with no electricity. I like to see horses at the rodeo, but I have no desire whatsoever to own one. For me, a place in the country would be a nightmare rather than a dream.
As your financial planner, though, I’d better keep those prejudices out of your affairs. Certainly, it would be my job to make sure you looked at this plan carefully before you leaped into it. I would have an obligation to give you my educated opinion about whether the property would actually increase in value or whether you were using overly optimistic figures. It would be my job to help you examine your idea with the cold, clear light of reality. Unless that examination found some major fallacies in your plan, though, I would be violating my responsibility to act in your best interest if I tried to talk you out of doing what you wanted to do.
On the other hand, if you came to me wanting to use half of your investment portfolio to buy stock in a new company drilling for oil in Antarctica, I would be violating my responsibility if I helped you do it. Letting you put your assets into such a high-risk scheme would clearly not be in your best interests, no matter how excited you were about the idea.
When you seek the advice of a financial planner, you are looking for just that—trained, professional advice. You don’t want someone who will passively stand by while you walk off a financial cliff. Neither do you want someone who tries to make you conform to his or her ideals instead of helping you work toward your own dreams.