Once upon a time…
Every good story has an antagonist (or problem) and a protagonist (solution to the problem). Our story begins with the creation of humans.
Our Own Irrational behavior
All humans are born with a unique set of characteristics, some good and some bad (nature). Each of us is also born into a unique environment that differs based on culture, location, family history, etc. (nurture). Our characteristics and environment combine to create deeply rooted behaviors and biases. The behaviors and biases we develop over time can become irrational and this can harm our relationships and portfolios.
Duke Students Irrational Behavior Example
In a recent experiment, Duke students, who slept outside for weeks to try and get basketball tickets were still subjected to a lottery at the end. Some students got tickets, some didn’t. The students who didn’t get tickets said they’d be willing to pay up to $170 to buy the tickets. The students who did get the tickets said they wouldn’t accept less than $2,400 to sell their tickets. The difference in the ticket prices has to do with irrational behavior. What caused one student to be willing to pay $170 and another to accept no less than $2,400?
There are three fundamental quirks of human nature.
- We fall in love with what we already have.
- We focus on what we might lose, rather than what we might gain.
- We assume that other people will see from the same perspective as we do.
We may purchase unnecessary insurance or hold onto a losing investment too long because we don’t want to lock in a loss and admit we made a poor choice. Unfortunately, our biases become blind spots, and we convince ourselves everyone else thinks the same way we do.
Life’s uncertainties and disappointments can also lead to discontentment. We are bombarded with commercials and advertisements telling us our lives are missing something and buying this product or service will lead to happiness.
Money isn’t the problem
Our emotions and biases mixed with discontentment makes us laser-focused on the one resource that can purchase products or services—our money. We can become so focused on money that we start to ignore relationships. Many people then blame money on their problems (if I only had a little bit more, then I’d be happy). Unfortunately, money isn’t the problem, it is just a symptom. Our irrational behaviors and misbehaving is the problem.
Preying on the vulnerable
In most stories, the antagonist has an evil side-kick. In our story, it is the unethical side of the finance industry. The financial industry understands that humans are emotional and irrational at times, and many within the industry prey on the vulnerable. They sometimes use an emotional response (such as fear or greed) to sell a product or service and close a sale. Unfortunately, these “so-called” advisors are very good salespeople and can get away with this due to their knowledge advantage over clients.
When an advisor doesn’t deliver what he has promised, he may misdirect clients by changing the subject or explaining away the underperformance through complex jargon the client doesn’t understand. The client leaves with their legitimate questions unanswered or partially unanswered.
Intelligent Investing believes these tactics are not only a wrong way to behave but also unethical.
To make matters worse, there are a lot of financial certifications that sound alike–causing unnecessary confusion to the public. It is important that you perform necessary due diligence on who you decide to use as your financial advisor and portfolio manager.
In contrast, Intelligent Investing was started based on the idea that we all have a purpose in life and have been given money to help accomplish this purpose while building relationships along the way. As we go through life, we face many decisions that can cause financial stresses. We may need to determine how we are going to pay for schooling or what career path is best. Perhaps, we want to get married or start a family. We may decide to purchase a home or start a business. We need to make decisions on asset allocation, investment choices, employer 401(k)s, and our children’s college planning. Finally, we need to make decisions regarding philanthropy, estate planning, social security, long-term care insurance, and retirement spending. Every phase of life has its own unique set of financial stresses. Intelligent Investing minimizes your financial stress so you can maximize your life.
What Makes Us Different
Intelligent Investing is a fee-only registered investment adviser (RIA) who has a fiduciary duty to every client. Fee-only means we don’t sell any products and are paid based on the assets that we steward. This removes conflicts of interest and places us on the same side of the table as you. We place ourselves in your shoes for every decision we make.
Intelligent Investing believes our clients should be the center of all we do. We want to provide the best client experience in every interaction, which is why our core values focus on each client.
Three Pillars of Financial Thought
Intelligent Investing has three pillars of financial thought: traditional finance, behavioral finance, and values-based finance. These three pillars are the foundation of every thought that goes into our research, portfolio decisions, and client communications.
At Intelligent Investing, we are a Registered Investment Adviser. Our advisors have the following credentials: CFA, CPA, and CFP. We understand that no one cares how much you know until they know how much you care. Therefore, while our credentials are one way to demonstrate our professionalism, they are only one of many multi-faceted dimensions of who we are.
Importance of Behavioral Coaching
Finally, Intelligent Investing believes that behavioral coaching is one of the most under-appreciated, yet most valuable things an advisor can provide clients. We speak the truth in love and value transparency and accountability.
Happily ever after
Intelligent Investing will be the first to acknowledge that we cannot control markets, nor world-wide events. We can’t control how long we may live, let alone your longevity. However, we believe that by investing prudently, controlling our emotions, and coaching you to control your emotions, we may provide a smoother path as we travel together on this journey called life. Consider joining us and making us your financial accountability partner. We’re here to minimize the financial stress in your life, so you can build stronger, deeper relationships with family and friends, fulfill your life’s mission, and live happily ever after.