Every investor wants to see their money grow – it goes without saying. So if growth is already the assumption when it comes to saving and investing, what describes the goal you have for your money?

When building wealth, it is important to know Why you build wealth, not just by learning what investment to add to your portfolio. It might sound like common sense, but I wouldn’t be spending my time writing this article if it wasn’t a common problem.

Many advisors commit investment “malpractices”

I see a lot of “malpractice” (yes, pun intended) when it comes to investing, just as it would if your doctor offered you a prescription before making a diagnosis. Discussing investment options without having a strategic plan in place first is like asking for a prescription without a diagnosis.

I was meeting with a doctor the other day and was working on getting to know her a bit, and in the middle of the conversation she asks the question a lot of people ask, “What investments do you recommend?” As a financial planner, I struggle with these kinds of questions because I believe they are the wrong questions to ask.

My answer was, if you meet a new patient and they ask you, “What prescriptions do you recommend?” what would you say? She replied that it would not be a question she could answer, as what she prescribed would depend on the needs of the patient.

Sure! Because it makes sense. Imagine you visit your doctor and the 10 minutes spent with him focus on a new drug that has promising results for a random disease. They explain the clinical trials, then break down the cost of buying the drugs, while offering a brochure asking what you think of the drug.

That would be strange, wouldn’t it? Yet, that is exactly what is happening in the world of investing. The conversations people think they should have with financial advisors revolve around investment options, past performance, fees, alpha, beta, standard deviation, market correlation, risk tolerance and so on…

These conversations have a time and a place, but this information has nothing to do with solving a problem (ie retirement income planning). The idea that you can just buy an investment because it looks good on paper is a backwards way of thinking. This is equivalent to buying the prescription without a diagnosis.

A man who asked all the wrong questions

I recently spoke with a gentleman who contacted me after listening to one of my podcasts. When we tuned in to talk, it was clear he was frustrated after meeting with several advisors and hearing about portfolio management styles, diversification approaches, benchmarks and performance. After all these conversations, he was not satisfied with what he had heard, which led him to ask me for help.

It was obvious to me that he had attended many sales presentations in an effort to find that perfect investment. But what I discovered in the first five minutes of talking to him was that he wasn’t actually looking for another investment, but rather wanted to be confident in his goals for the future.

Intrinsically, people will try to circumvent a situation where there is a vacuum of knowledge or understanding about something based on what they already know and understand. For him, these are investments. He understood investments, and unknowingly he was asking the wrong questions.

People who have accumulated wealth know and understand how to grow money, but when it comes time to start using the money or protecting it, it can lead to confusion and unease, which drives them to go back to what they know. It is circular reasoning that most often leads to an unachieved goal.

So, back to my conversation with the gentleman…

I asked him what he told advisors he wanted to do, and he said he told them he wanted to grow his money. I said, yes – everyone wants their money to grow, but did you share anything else with them about what you wanted for your life?

I asked him this follow-up question because then again, when he spoke with these other financial advisors, they obviously shared their investment ideas with him – but nothing he heard quenched his proverbial thirst. So there was obviously something missing in the conversations, and if I wanted to help her, I had to figure out what was being overlooked.

He responded by saying that he hadn’t been asked anything other than questions about risk tolerance.

Getting to the heart of the matter leads to a surprise

In my effort not to be another failed attempt with a financial advisor, I dug a little deeper. I asked him if he saw a need for money in the future. Did he need it to make money or did he have a plan that required spending some of it? His answer was no, that he didn’t need the money while he was alive.

That last sentence piqued my curiosity, so I asked, what do you mean, “while you live?” He went on to say, “I want to make sure my wife is taken care of if I die.”

BINGO! It was suddenly clear, and I said to him, I see the problem you had. I started asking her what the #1 priority in her life was right now. He answered, to make sure his wife was okay if he died. I responded by saying that taking care of his wife is exactly what has always been the problem. He had bad conversations with these other advisers.

He wasn’t looking for another investment to buy; he wanted his wife to be taken care of, and that meant having a strategic plan in place. We spent the rest of the call discussing how to take care of his wife.

Financial advisors are so focused on collecting assets to manage that they often miss the forest for the trees. They assume everyone wants their investments to grow while trying to prove they’re better than the next advisor regardless of why the client really needs the money, and that’s a huge problem.

Your future is not limited to money

Financial planning is not about investments; it’s about determining how to use the money now and in the future. Investments and other products are simply used as a catalyst to achieve goals. Too many advisors confuse this and, in turn, this confuses the public into believing that they should always be looking for the next best investment.

It’s easy to suggest that the gentleman in my example should have known all along what the problem was, but it’s not that simple. People, in general, do not understand the disconnect between their needs and their investments. I know this from the thousands of conversations I’ve had with people with large investment portfolios, who are confused about how to use the money they’ve accumulated to meet their retirement needs. . I explain how to do this in my podcast episode titled “Six Steps to Make Sure You’re Ready for Retirement.”

But finding the right advisor to help you come up with a plan can be tricky for the reasons I’ve already covered. You can learn more about what to look for in a financial advisor by reading my column, “The Financial Fiduciary Standard Explained.”

Here are some steps you can take to increase your chances of success and help you put a plan in place to achieve your goals:

  • Ask yourself what is the reason for making your money grow. Remember there are specific things you need the money to do for you, focus on that. How are you going to use the money?
  • Then, pay attention during the next conversation with an advisor, noting which part of the conversation is about your life goals, concerns about the future, tax situation, and other non-investment related topics versus to which part is focused on investment products. I see this as the 80/20 rule, 80% of the time should be spent on what you’re trying to accomplish, and the strategy to get there and the other 20% is about the products to use. Otherwise, you’re just sitting in a sales presentation, not a financial planning discussion.
  • Resist the temptation to ask questions about investments and force the conversation to focus on your goals. Explain your goals for the money instead of projecting your expectations for return and risk tolerance, and if the advisor seems focused on their product or investment strategy, find another advisor.

This is how you get the right diagnosis and the right prescription.

Need help putting your ideas on paper? You can get a free copy of my Financial Vision Guide by visiting the resources page of my website.

Founder and Chairman, Skrobonja Financial Group LLC

Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of the St. Louis Mo-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience uncover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books and his Common Sense podcast was named one of the top 10 by Forbes. In 2017, 2019, 2020, 2021 and 2022, Brian received the Best Wealth Manager award, in 2021 received the Best in business award and the Future 50 in 2018 from St. Louis Small Business.