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If you don't care about your investments, no one else will

Most financial professionals accept that implicit in their commission or fee is some compensation for taking the responsibility for the poor performance of a client's investments without taking the credit for good performance. It is a bit of a joke, of course how can a financial planner in Bendigo possibly be responsible for the performance of global markets?

Most financial professionals accept that implicit in their commission or fee is some compensation for taking the responsibility for the poor performance of a client's investments without taking the credit for good performance. It is a bit of a joke, of course how can a financial planner in Bendigo possibly be responsible for the performance of global markets?

But still they take the blame and they do so to protect a client from taking the blame themselves while generously bequeathing them the credit when it goes right.

It is an important service which is highly valued by the client: a free option on looking clever, or at least not stupid, when explaining your investment performance to your spouse, dependents or dinner party guests.

Far better that your fund manager is a muppet, your stockbroker an idiot, or your financial planner a crook, than you take responsibility. The client is always right, after all.

But games aside, the truth is that there are certain decisions in finance for which the client is responsible and rather than hide behind your adviser it would be far better if you addressed them.

They include:

The initial decision to invest: If you wander on to a car lot looking at cars, the assumption is that you want to buy a car. So when you turn up in the offices of a financial professional, it is assumed that you want to buy something. As most financial professionals get paid only when you do buy something, their job is to arrange for you to buy something. They are both salesman and agent. But if you wander on to the yard and you then get sold a car, what did you expect? Your first responsibility is choosing whether to invest at all.

Leverage: Leverage to us is a product. We get a trail on it and even if we don't, the more money you have, the better it is for our fees and commissions. It is in our interests to sell it to you and we would be foolish not to present it as "normal" even when it's not. But it's not normal and it's not necessarily good for you. It is just an accelerant: If you lose, you will lose more if you win, you will win more and the undeniable reality is that it is only suitable in reliable bull markets when the investor has the Midas touch. And by the way, if you own shares outside of super and have a mortgage, you're leveraged and being leveraged or not is your responsibility.

Selling: One of the hardest-learned lessons from the global financial crisis is that nobody ever tells you to sell, because our job is to get you in - not let you out. The decision to sell is yours. When you decide to do it, you will have to be assertive because we will likely resist you and we have a well-developed bag of tricks to stop you. If you want to get out of the market it is your responsibility to decide to do so.

Happiness: Happiness is expectations met and the route to unhappiness is to have unrealistic expectations about what your investments are likely to achieve. These often stem from not understanding your benchmarks. In managed funds it's the average return on all the invested asset classes, less fees, and because of fees you have to expect to underperform. Because there are so many unrealistic expectations in this industry, often led on by unrealistic sales pitches, the number of people who get pleasantly surprised is tiny and the number of people disappointed is big. Happiness is a function of realistic expectations - and your responsibility.

The bottom line is that you cannot avoid responsibility for your own financial affairs. You have to be involved because, as any financial professional will tell you, "If you don't care, no one will."


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