How do you know when to sack the coach? Of ...
How do you know when to sack the coach? Of course, when we say ‘coach’, we mean financial adviser. Our job can, in a way, be compared to that of a sports coach except our focus is on the financial wellbeing of our clients.
 
​In order to win a footy game, for example, you need to train hard. But you also need a coach to guide you along the way. Similarly, in order for your money to work best for you, you need to be efficient with it and you need good financial advice. Do you see where we are going with this?
 
Using this example, you could compare us to a footy coach. A footy coach can’t get on the field and win a game for you, but they can certainly tell you what exercises and drills you should do. Likewise, we can’t go to work for you and earn your money, but we can, and do, help channel your money in the right direction.
 
A financial adviser is also similar to a footy coach in that sometimes, you will have a negative outcome. A footy team might lose a game every now and then. It’s almost certain that at some stage during the season, even the best teams will lose a game.
 
But if you lose your first ever game as the footy coach, it might not look so good. So how do you know when to sack the coach? Or in our case, how do you know when to fire your financial adviser? On one hand, sticking it out might be the best option since investing is a long-term game. On the other, what if you do nothing and continue to get bad results?
 
We’ve put together a list to help you with your decision.
 
When shouldn’t you sack the financial adviser?
  1. When there is a drop in the market. This is not your financial adviser’s fault - this is reality. It happens, even to the best investors. And if your adviser has fully explained the risks to you, they are doing their job. For instance, they should explain that higher long-term gains also come with more volatility. You might be doing all the right things, and still have a 30% drop in the market. Even in a high growth market, on average one in five years will be negative.
  2. When they tell you something you don’t want to hear. For example, if they advise you against buying your seventh sports car. Your adviser’s job is to help you with your long-term financial strategy. A footy coach making you do strength exercises is the equivalent of a financial adviser asking you to make voluntary contributions to your super. Not easy, but it gets results.

When should you sack the adviser?
  1. If they want to change your strategy suddenly and tell you to sell up for cash. They should be talking you out of making rash decisions, and they should be telling you not to panic when markets are down. If they aren’t doing this, sack them.
  2. If they are not looking at your long-term goal - which, of course, is your retirement. Your retirement goals and the steps to get there should be discussed at length.
  3. If they seem more concerned about themselves than with you and they say things like ‘we’ll generate a big return’ or ‘we outperform benchmarks.’ These are not specific; they are simply generic marketing phrases.
  4. If they don’t talk to you about trade-offs. There are things you will need to change in order to get a different financial outcome. There’s no such thing as a free lunch. Speaking of free lunch, this would be like if a plump, unfit person went to a personal trainer and the trainer said ‘sure, you don’t need to make any changes to your lifestyle, just take this magic pill.’ Would it be nice? Sure. Does it work? No.
  5. If they tell you they will get a high return with no volatility, definitely sack them.
 
And finally, we’ll leave you with this: trust your intuition. Relationships are built on trust. If you walk into that office, and your first impression isn’t a good one, leave. You won’t make financial decisions easily if you don’t trust your adviser.
 
Okay, we lied, there’s one more. If the ad shows a picture of the financial adviser pointing to a pie chart with a sly-looking, suspiciously-white-toothed-smile, run. Pie charts are the lowest form of charts. You’re better than that.
Published by Dallas Davison, Michael Hogue and Ali Hogue. October 9, 2020