Tom Sedoric and Casey Snyder

What is the value of financial advice? It is an interesting and debated question. Ultimately, the value depends on how well the advisor knows his or her client, how well the investor knows and can communicate what they want and need, and finally on what the investor wishes to accomplish.

A better question might be asked: Would you take free financial advice from a professional if it was offered? To most, that would appear to be a compelling offer. However, there was recently a high-profile lesson which offered another answer in the form of an unfortunate and resounding “no”. 

In the spring of this year, Kenneth Feinberg wrote in the New York Times about his experience as the special master who administered the September 11th Victim Compensation Fund, the compensation for the 2013 Boston Marathon bombing, and funds for 2007 Virginia Tech shooting massacre. Feinberg wrote about how his experiences over three decades of being asked to determine the value of the dead impacted his own financial planning choices. He eloquently described the impossibility of his role writing “These assignments require me to make mathematical calculations tied to the size of the available compensation fund, what the victim most likely would have earned over a lifetime but for the tragedy, and additional amounts for pain and suffering and other extraordinary circumstances,” Feinberg wrote. “In taking on these tasks, I have come to realize that, whatever your personal wealth, money is a poor substitute for loss.” 

We were struck by another aspect of the September 11th Victim Compensation Fund that says much about the depth of financial literacy in our society. Amazingly, each of the 5,300 claimants who received death or injury compensation were offered free financial counsel (the average death payout was a little more than $2 million while the average injury payout was $400,000). According to Feinberg, “Goldman Sachs, JPMorgan Chase and others stood ready to help, but only 78 of 5,300 eligible claimants took advantage of the opportunity. ‘We don’t need any expert advice,’ was the overwhelming response.” One can’t help but be reminded of the countless lottery winners who are now bankrupt.

It’s one thing to seek, consider, and then choose not to take advice. One of our tenants of selfreliance isn’t that we take on all burdens alone, but that we welcome good faith counsel from those who don’t have “an agenda”. Advisors can help us learn more about the world around us. 

We don’t have to take the advice or agree with another’s perspective but we can certainly learn from them. And we can always better understand how we value money especially when a financial windfall occurs due to a tragedy or to good fortune. 

It’s silly to argue that money doesn’t have a value beyond the paper currency in our hand, or the figures in an account which shows our monetary wealth. We know it does. Financial resources can grant a certain security or in turn create insecurity. But how we define that value can say a lot about the choices we make and the knowledge we seek. Fred Hall, Jr., a longstanding friend and mentor, once cautioned about how the baby boom generation has come to feel and act entitled, as though the bounty of the universe was created just for our benefit. In our opinion, being entitled usually leads to devaluing personal responsibility in the shaping of our personal and financial destinies. 

Talking about finances isn’t easy in part because it’s been a cultural black hole. A current bestselling book by Ron Lieber, “The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous and Smart about Money,” takes a positive step in teaching effective ways to talk about money. Among many virtues, Lieber makes a strong case that it’s never too late to learn and share our perspectives on money – with children, friends and family members of all ages. Bruce Bates, Tom’s 84-year-old father in law, agreed. He read “The Opposite of Spoiled” in a day and a half and in spite of his fine stewardship of the next generation for over 50 years, he sought to clarify and set the record even straighter with a clear message about money and savings to his children and grandchildren. 

In the case of Kenneth Feinberg, the sober realization that “nobody is immune from life’s misfortunes” led to a transformation in his outlook. “In effect, I’ve received on-the-job training for managing my own wealth and protecting it for my wife and family,” he wrote. “Hundreds of Sept. 11 victims failed to set aside sufficient funds to provide for their families, believing that future earnings would be available to make up for any current shortfall. But the terrorist attacks interrupted such plans. Saving today is a hedge against unknown events tomorrow.” 

We must ask ourselves how we value advice and how financial advice might impact one’s long term plans. The answer to the question can have a profound impact on shaping one’s future. Who is your Kenneth Feinberg?

 

This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. The views expressed are those of Tom Sedoric – Partner, Executive Managing Director and Wealth Manager and D. Casey Snyder, CFP® - Partner, Senior Vice President and Wealth Manager, and are not necessarily those of Raymond James. Retaining the services of a financial professional does not ensure a favorable outcome.