We may be your financial planner – advising you based on our expertise – but you are your own Minister of Finance. Only you can best control your financial destiny and the way to do that is to take responsibility. We recently came across this post on Moneyweb by Patrick Barker along these same lines, which we think is quite empowering.

Here are a few extracts:

The term “victim” is used in many instances, and in the financial world we hear of victims of investment schemes, inflation, poor planning and so on. But what if the word victim did not exist and the notion and culture of being a victim disappeared? If we are not a victim of something, we must take responsibility for it. While this may seem challenging, it can also be empowering.

When approaching investment planning, we need to do so by assuming complete responsibility for our decisions and accepting the outcomes. To achieve this, we must do enough homework to make informed decisions. And for that, we often approach professionals in the investment industry. They may become accountable for their advice but the responsibility of our decisions still remains ours: ownership of our decisions gives us power over them.

If we were to hand over full responsibility to an investment professional, we should not allow ourselves to feel disillusioned if we are not satisfied with the results. After all, we would have abdicated responsibility.

Even if we have a completely non-financial background, or simply believe that we are not financially minded: this does not mean that we cannot learn. We can do anything if we set a goal and then apply our minds.

Much of our general thought patterns, including those about money, hinge around fear about the future and guilt about the past. Clearly, our perceptions are the driver behind our ultimate actions. In the investment context, we often find out through experience what those perceptions are which is where the investment professional’s role is so important.
So, what is the ideal way to approach our investment decision-making process?

• Consult with an investment professional and ask them to educate and feed you with information continually. Approach the relationship as a partnership. Define the boundaries, clearly identifying who is responsible for what and where the accountability lies.

• Once agreed, understand that emotion is going to play a large part in decision making. This might seem fairly logical, but the influence of emotion in decision making is an understated aspect of long-term investment planning. By being attached to our emotions and resultant feelings, we may make decisions that affect our outcomes unnecessarily. This leads to common behavioural reactions such as the herd instinct and a tendency to sell low and buy high.

• The ideal way to invest is to establish one’s needs in terms of a return, given assets and liabilities; compare the needs with actual risk tolerance; invest according to an asset allocation to accommodate those needs.

Although the responsibility still lies with the investor, the relationship we develop with our chosen professional will help guide us through the emotional patches. In most cases that investment professional will be there to help keep us on track towards our ultimate goal. This will require helping us to manage our emotions at times when we act in conflict with our agreed risk profile and asset allocation.

As investors, we need to be mindful that not only are our emotions affecting the decisions we make but so are the emotions of the people through whom we invest money or who do our planning. We do need to question that possibility with them by asking what they do to avoid being affected by their emotions. Once satisfied by their answer, that professional becomes our emotional gatekeeper but they should never take on the responsibility for our decisions.

In summary, the biggest pitfalls that an investor can face are:
• Failing to take responsibility for their own investment decisions
• Choosing the wrong investment professional; and
• Allowing emotions into the decision-making process

Ultimately the responsibility lies with the investor. Accountability lies with the investment professional. The partnership that develops must surely be healthier for all parties.

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