Advice or Accomplice

Advice or Accomplice
There is a very important question you need to ask yourself when you visit with a financial consultant — are you seeking advice? Of course, you may say. But many times you are not really looking for advice but an accomplice. Sounds complex? Let us try to understand this. When I visit a financial consultant, is it because I have a few ideas, have I made some decisions that I want him to endorse, or is it because I go with an open mind and ask him for his competent financial advice under the given circumstances? More often than not, it happens to be the first situation, maybe subconsciously.

Let me explain with an example. An engineer meets with a consultant with his wife looking for advice. He is ready with his tax returns and shows how he has smartly invested $100,000 in CDs earning him 5% interest at that time. His mortgage interest was less than 4% and he was saving tax on mortgage interest too. So he was under the impression that he was making thousands of dollars every year. Great, indeed!

The financial consultant explained to him that firstly, the interest he earned on CDs was actually causing taxes on his Social Security. If this component were taken away then the taxes on Social Security would go away too. These additional taxes paid on Social Security were more than the money he was making on his mortgage interest. Secondly, he thought he was getting a lot of tax deduction on his mortgage interest but in reality he was getting only about $1000 because the standard deduction was covering most of his deductions. So, he did not even get the deduction he assumed he was getting. The sound financial advice given to him was to pay off his mortgage.

Did he listen to this advice? No. He was not really looking for advice. He wanted to show his wife how smart he was in front of a financial advisor, but he ended up doing the opposite. He just wanted an accomplice.

So, when you go out seeking advice, consciously seek advice. Do not go with biases, closed minds, or any agendas in place. They will put blinkers on your mind and filter out any sound advice given to you. Do not go out looking for accomplices for your ideas. Only good financial advice can lead to sound financial prudence.

Seek advice not an accomplice!

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