As we know, everybody likes to give their opinion. Just sit next to any family member at a Thanksgiving dinner and everyone’s going to tell you their opinion and give you advice on things that they barely know about. We do this because we want to feel smart, we want to connect with people, and the way you connect with people is by giving advice. But advice should be based on your personal situation and also based on people who know what they’re talking about. Unfortunately, a lot of the financial advice that’s given are from either, A, people who don’t know what they’re talking about, or, B, somebody who’s never met you.

Let me give you a story illustrating advice from somebody who doesn’t know what they’re talking about. I met with a teacher who was about to retire and she said, “Listen, I already have somebody taking care of my current finances. I just need help with my pension.”

I said, “Okay, that’s fine, but I need to know where your current finances are to make sure that your entire plan fits together.”

She said, “Listen, here’s what I have and I have all small cap stocks because I want small risk.” I said,

“Small cap stocks? Why would you have small cap stocks for small risk?”

“Because I’m about to retire. I want small amount of risk in my portfolio.”

I looked at her and I said, “Small cap does not mean small risk. It means small company. It means big risk. Who’s your financial advisor?”

She kind of sheepishly said, “Well, it’s been the gym teacher. That’s what he does on his off time.”

I looked at her and said, “Okay, well, we’re not going to listen to the gym teacher anymore.”

That’s the type of situation where that person obviously didn’t know what they were talking about. They thought they knew, and maybe they had some good returns in their portfolios and thought they were an expert on the subject. But they could have really hurt this lady because those types of investments in a 2018 scenario would have gone down by 60% and she wanted no more than 3 or 4% risk in her portfolio.

The other type of advice that you want to be careful of is taking advice from somebody who you’ve never met before. The best example of these are the typical radio hosts and TV hosts who are giving advice to the masses without really knowing your situation. These people are “financial experts”, they’re not actually licensed financial advisors, but they deal with finances every day. The problem is what they’re giving you is advice that’s just boilerplate. It’s for everyone in the world and every single person is different.

If you go back to our video on The Five Needs of Money, you’ll see that if you do that exercise, there’s over 160 different ways that that can break down. In that, one person can be married and one person can be single. One person could have kids and one person could have none. Everyone is different there. If you’re taking advice, the number one priority is to make sure that person knows what they’re talking about.

Number two, you should make sure that they know your personal situation. Listening to a radio show or a television show and putting your entire financial livelihood in their hands when they’ve never met you and they don’t know your situation, in my opinion, is a little irresponsible. Am I saying you shouldn’t listen to radio or TV shows or you shouldn’t listen to your uncle? No. What I’m saying is take it as information. Gather that information and then make an educated decision on it. Don’t take it as advice.

Information is sets of data that will help you take advice from somebody. If you’re going to take advice, make sure that they have these two things:

• They know what they’re talking about. They’ve dealt with people just like you in your situation many times before.
• They know you. They know your specific financial situation.

You might say, “Okay, that’s fine, but aren’t you on here giving me advice?” No. Everything written here should just be considered information. I’m not here to give advice. That’s just for clients who specifically work with us and we can sit down and spend an hour or two finding out all about you. My job here is to give information so you can make an educated decision on one of the most important things in your life, your finances.

Securities and advisory services offered through Madison Avenue Securities, LLC, member FINRA SIPC, and a registered investment advisor. Madison Avenue Securities, and Don Anders are not affiliated companies.