*relax no spoilers
There is no shortage of business advice out there and you could quickly send yourself broke trying to take all of it and achieve little in the process. Watching The Big Short I noticed a couple behavioural patterns throughout the movie and realised there are a few basic principles underpinning any relationship involving advice;
If the risk cannot be explained simply, then it simply isn’t worth the risk.
There are really only two reasons people either can’t or don’t explain things simply; they don’t understand it themselves or they are hiding something. Neither inspires confidence or trust. The answer is to find someone who is willing and able to explain the proposition simply, and if you still don’t understand then stay away from it.
Businesses are in it to make money.
For all the relationship building warm and fuzzies it is a cold fact that anyone in financial services is in it, like every other industry, to make money. This includes; accountants, banks, business advisors, brokers, financial planners, investment services, superannuation funds, the list goes on. Obviously not all have sinister motivations but they like any other business have their own interests at the top of their priority list. This means you need to protect yourself and the best way to do this is to be informed. Know what you are getting into. Don’t run with the first recommendation, find as many opposing views as you can. The more varying opinions you can find the more information you will have to make your own decision. And ask for proof of execution! They need to provide proof of any service they perform for you every time they do it. I’m talking to accountants lodging GST and tax statements and traders and investment firms placing trades and investments in particular!3.
There are good people out there.
How do you pick them?
- They provide clear information and want you to understand it and will work with you until you do.
- They are honest and disclose their own interests in the proposal.
I realise this post seems a little simplistic and anyone who sat down and thought about it for a second could have easily written the same. My reason for writing and posting it anyway is because simplicity is often the first casualty of any major decision made both personally and commercially and I believe that the obvious needs to be restated to be enacted.
We get caught up and lost in all the wrong perceptions of what works and what doesn’t. Financial services commonly have an undertow of; ‘if everyone could do it then there would be no money to be made’, a ‘more complex = more money’ attitude. This unfortunately means a lot of trust is handed over to many of the wrong people. It doesn’t need to be that way because every transaction, no matter how complex the mechanism, has at its core two basic questions that everyone must ask and be able to answer;
- Am I receiving what I perceive as value from this transaction?
- Do I understand and accept the risk involved?
People seek advice to answer these two questions and a good advisor will make sure you can answer both, they don’t answer for you.