Do You Expect Your Financial Advisors to Practice What They Preach?

About a month ago I received an email from a reader regarding this piece -- a story about a marriage counselor that got into credit card debt and eventually defaulted on it. Here's what the reader had to say:

It is not often that I feel compelled to send an article in for you to possibly comment on, in fact this is the first time I have done so, but reading this left me absolutely appalled by the lack of responsibility taken by this guy.  Not only is he not taking responsibility, he is flaunting it on a widely read website, and the editors published it!
 
This guy is a marriage counselor, a job in which he probably needs to tell people to take responsibility for their actions, be accountable, or act in a moral and ethical manner all the time.  However, in his own life he essentially steals from a credit card company and blows it off with a comment like "well my credit was already ruined anyway" or something to that effect.
 
I understand people can run into CC debt for hundreds of different reasons, but this guy got into debt because he was financially irresponsible that the big, mean credit card companies took advantage of and then holds himself out, and is held out by a reputable organization, as someone who is financially responsible.  People have paid off way more then $12,000, not because it would help their credit, but because it was their responsibility and there is an ethical obligation to pay your debts.  He has the ability to do the same (i.e. has a job and money coming in the door).
 
Heaven forbid I ever have marital issues where my wife and I would ever need to see a counselor, but if we ever have to see one, I certainly won't be giving any money to a crook like this guy.
 
Thanks for "listening" to the rant.

I know what this reader means. I've talked about the issue before when I said I wouldn't go to a fat doctor. Here's the heart of the matter: do you expect a counselor/advisor to take the advice he dishes out -- or is it good enough to get solid advice even if the giver hasn't implemented it in his life?

For instance:

• Would you listen to a doctor that was overweight tell you that you needed to eat right and lose weight?
• Would you go to a financial planner that had a low net worth and bad personal finance habits himself?
• Would you go to a mechanic that had a poor-running car?

Or, as in this case, would you take advice from a guy that says you need to take responsibility for your life, have some self-control, and be honest and fair to others when he isn't doing these himself?

It's an interesting question. Does "do as I say, not as I do" apply or do you think advisors should show some success in implementing the advice they give out?

Think of how many financial "experts" there are out there dishing out advice -- bankers, investment advisors, financial planners, insurance agents, authors, bloggers, lawyers, and on and on. Do you take their advice even if they haven't shown success with it in their own lives?

Comments

[Crystal]

I would listen to an overweight doctor.

I would not go to a financial planner with a low net worth or bad financial habits.

I've heard the best mechanic's drive old beaters. If they drive new cars it means that they are charging too much or that they don't know how to keep an old beater running.

It is easier to set up good automatic financial habits than it is to lose weight. Simply set up automatic deductions from your paycheck into your 401k and Roth IRA and you're well on your way to a fine net worth. Weight loss requires the amount of work to lose the weight and the effort to keep it off. That seems much harder to me.

[Crystal]

Oh, and I would never go to that marriage counselor...he's a thief with no ethics.

[Rick Francis@ponderingmoney]

An overweight doctor may still be the best doctor in a particular area... a doctor has to know medicine which really isn't the same thing as being healthy themselves. In fact if they were very concerned for their own health they should get out of medicine- too much stress and working too many hours.

On the other hand I would never consider overweight personal trainer- fitness is their business. Similarly, I wouldn't get to a financial planner that was having trouble with their finances- if they can't manage their own finances then how are they going to manage your finances?

However, a financial planner that has made the mistakes in the past and learned their lesson may actually be better than one that always did the right things.... They may understand their clients better, and have strategies to correct bad behaviors.

-Rick Francis

[Susan]

I have had this same argument with my husband for a while now. His best friend is our life insurance agent, and would also like to be our financial planner. However, I know WAY to much about this guy, and there is no way I would EVER let him do anything with our finances when his are a complete mess!! I didn't really even want him to sell us life insurance, but at least that's just one transaction in my mind. I determined how much insurance we needed, he just sold it to us. Eventually we will shop around for better rates with other agents, but we have to wait until our friend "gets back on his feet" financially before my husband will pull our business. How backwards is that? I am looking at the dollars and cents (and sense) and my husband is looking out for his friend. But I can't really fault him too much for that.

[Brian]

Isn't the more appropriate question whether one would go to a doctor who had defaulted on his or her credit card debt?

To the extent that one's marital problems are caused by financial difficulties, a marriage counselor with poor financial habits could conceivably be in a better position to empathize. Or not. But defaulting on credit card debt seems unrelated to the marriage counselor's skill as a counselor.

[Jim]

I think peoples advice should stand on its own. If someone tells me "spend less than you earn" I shouldn't need to check their net worth to verify the validity of that advice. Financial advice should also be applied to individual situations so what works for me may not work for the person giving the advice, that doesn't mean they are bad advisor or that its bad advice.

I would not generally discount a doctor due to weight. Being a skilled surgeon and avoiding fatty foods aren't the same thing.

I would expect a good mechanic to have no problems with a car that is unreliable. Since they know how to fix cars themselves its no big deal for them if the car breaks down. So if they are smart they can save a lot of $ by driving a beater and fixing it themselves.

[Clayton]

As with all people who give advice, get a second opinion. when a fat doctor and a healthy doctor tell you the same thing you know its sound advice. Same goes for financial planners to me. listen to advice from multiple ones and see what is sound advice. The difference between those who are successful at giving advice and those who are successful is that when they receive good sound advice they actually apply it in their lives.

[Mike Hunt]

How does the old expression go...

Those who can DO

Those who cannot do TEACH!

Remember having career discussions with your high school guidance counselor? I remember thinking even back then that a conversation with this person would be more meaningful if I were aspiring to become a guidance counselor as well...!

-Mike

[MC]

Well, I *would* listen to an overweight doctor who told me to lose weight (if I was in fact overweight).

Because of course I'd already know that I need to lose weight. Ditto for "how" to lose weight (eat less, exercise more) because I'd already know that as well. Doctors know a lot about diseases and pathology and such, but there's no special knowledge they have about being overweight (because it's not a disease). Check with a doctor to make sure you don't have an underlying problem like heart disease or joint problems or diabetes that may affect how you exercise or diet--that's it.

Re the financial planner--obviously if the FP's finances are a mess, I certainly wouldn't listen to him/her. Just like I wouldn't go to a hairdresser who had an awful dye job or cut.

Re a marriage counselor with financial problems? I'd steer clear, since I'd worry if their advice was designed to "cure" the problem in the marriage or extend it in order to help their bottom line.

Same thing if they were an insurance agent or a car repair person---someone who is in extreme financial difficulties is not someone I'd trust about how much money/time I should spend at their business.

[DCS]

What if all of the fat doctor's patients were mostly healthy 98 year olds?

What if the destitute financial planner's clients all went from slumdog to millionaire under his guidance?

What if the jalopy mechanic's clients all had 15 year old cars that ran like tops?

Surely professional results should have some bearing when judging performance. Personal results can certainly be factor, but should they be the definitive one?

[J. Money]

Yeah I'm with a lot of others here - Id take good advice from anyone as long as it
was truly good advice. Everyone knows if eat nasty food and don't excercise you'll gain weight, just like if you spend spend spend and never save save save - it'll cost you.

I might think some of these professionals are idiots for not following what's smart for them, but Id still take the advice. ESP from a doctor who's got the skills. All these professionals are people with emotions too.

[Marc]

No, to the doctor and financial planner. The mechanic, I would need more info. I know several mechanics, that buy beat up cars and use them while they fix them, then they sell cars and start over.

Also the doctor and financial planner are evidence of systematic poor decisions, while the mechanic may have bought a lemon.

A mechanic, I would rely more on reputation and references.

[Infinion]

I find it funny that all the people on the article are being praised for not having a credit card any more and are giving advise on how to live like that. They all make it sound like they were fed up with the company or whatever else excuse and so they just stopped using the cards. Yeah, right. They couldn't get credit if they wanted to. That's the only reason they've stopped using it, and it's probably still a good thing. The marriage counselor makes me a little sick...

[heather t]

Would you take direction from your batting coach whose spectacular statistics resulted from steroid use?

[Crystal]

I looked at the article and all 5 families involved...3 of them paid their debt off eventually. 1 of them settled with the credit card company. Only Mr. Marriage Counselor stopped paying off what he owed.

I've read hundreds of articles and posts about people who saved their way out of debt...even FMF has one posted about a couple who saved their way out of a $108,000 hole. Those people made mistakes and corrected them.

This guy makes me angry...unethical thief. What is different about this and white collar crime that has prison sentences attached? Didn't he steal $12,000?

[MikeS]

With a financial planner, who's to know if the cause of a low net worth is the result of the spouse or not. Same principle applies to the mechanic. Maybe they drive that car because their spouse doesn't work and they can't afford anything better. We shouldn't project our idea of how a professional should be, but look at their advice as it relates to our situation.

Just my 2 cents.

The marriage counselor is a crook.

[guinness416]

I don't work with any financial planners, but beyond being fairly sure they're not independently wealthy (or why wouldn't they be doing something more fun) how the heck would you know their financial situation?

Never had an overweight doctor but a number of the docs I've seen over time have appeared stressed up to their eyeballs, which probably will kill 'em before the fat doctors.

[Tyler]

The doctor being fat has nothing to do with his knowledge of the human body and what actions I should take to solve what ails me. If you take issue with a fat doctor telling you to lose weight, you would logically take issue with a sick doctor telling you to take precautions against getting sick. To discredit advice on this basis lacks any logical merit.

If one thinks critically about the advice being provided, the private actions of the expert are irrelevant.

One can be a horrible money manager in their personal life and an exceptional money manager in their professional life. There are so many variable to this equation that differences will almost certainly exist.

[Tyler]

“This guy makes me angry...unethical thief. What is different about this and white collar crime that has prison sentences attached? Didn't he steal $12,000?”

1 He did nothing illegal.
2 There used to be a thing called debtors prison… wasn’t really a good thing and one of the important factors in the growth of the United States. (Hard to take any business risk when prison is the cost of failure.)
3 He paid (was charged) an interest rate by the financial institution to compensate them for the risk of default. They made the loan knowing there was default risk. They made a risk/reward decision and they lost.
4 ‘unethical thief”- is it possible we don’t know everything about this person and what influenced his decision? Unethical- maybe. Thief- not at all.

[MattJ]

Whenever you hire a subject matter expert for advice, it should be BECAUSE you need the advice. That is, you're not in a position to know whether any particular piece of advice is good, and you've hired the subject matter expert to tell you things you don't already know or don't have the time, desire, or ability to learn without him/her.

A financial expert sends a strong signal of competence in his field if his finances are in order. More importantly, a different financial planner sends a strong signal of incompetence if his finances are a mess. "Spend less than you earn" is good advice coming from either of them, but I don't care about that because I'm not paying ANYONE for THAT piece of advice.

Someday I almost certainly will pay a financial advisor(s) to help me purchase some rural land out-of-state and then enter into an arrangement with a third party to be the caretaker of that land in my absence. I will do my own research, but I expect the advisor I pay to help me with this to tell me things I don't already know, and couldn't possibly have thought of without his assistance. When I look for this advisor, I will be most impressed if the fellow can demonstrate that he's experienced and successful at doing this already, either for himself or for current clients. All other things being equal, I'll pick a guy who thinks his own advice is good enough to follow over someone who thinks he has a rough idea of how to accomplish what I want accomplished, and may be no good at it.

That being said, what he does in his own life is likely to be different from what he advises me to do, since we will likely have different salaries, goals, family situations, etc. So, in that sense, I don't expect him to practice what he preaches.

My views towards doctors would be similar, but to a lesser degree.

[laura]

There is a difference between knowing the facts of a subject (how to get out of debt) and then knowing how to apply them to your own situation. I can spot my best friend's mistakes in her marriage a mile away, but she has to tell me mine. I'm too close to the situation and can't diagnose my own problems.

Also, that comment above regarding "those that can, do/teach", some people can do things well. But they can't teach. Teaching is a different skill altogether. you have to diagnose your students' learning needs and you have to be able to phrase things in a manner that will sink in. So just b/c you can do something, doesn't mean you can teach. And vice versa. I'm a good teacher, but that doesn't mean I can do the subject matter. I can teach weight lifting, but the doc forbade me from lifting weights for health reasons. that doesn't mean i don't know what I'm talking about. You never know why someone can't do something: financial planner who's great at financial planning but bad at picking a divorce atty and got hosed. You never know. I would rather interview them and asses their knowledge. I will never not know something about what i'm hiring someone to do.

[Crystal]

@Tyler
Good point on it not being illegal...the credit card companies did choose to risk loaning him money.

He still borrowed $12,000 and decided to not pay it back...that's theft or something as close to it for the difference not to matter to me. Whatever the terminology, he makes me mad and a little sick to my stomach.

I don't care what his excuses are...even if something horrible got in the way of making payments, he could have tried to work it out with the credit card company. In the article he said, "I still owe the money, but the credit card companies usually write off balances after seven years. It's killed my credit rating, but it was dead anyway because of my late payments." No one forced him to spend the money. He should at least try to pay some of it back. He comes off as a self-centered jerk with an inflated sense of entitlement.

[masterrwong]

Agree with guinness416. How the heck would you know a financial advisor's own financial situation? I think there should be some kind of law to require financial advisors to disclose their own financial situations when consulting with their clients. Don't we have to disclose our financial statements when applying for a loan? I don't see why we can't do that to financial advisors.

To me, there is no such thing as financial advisor, period... unless they are liable for my financial lost. Of course, I would be more than happy to pay a percentage if there is any gain. Buying advice is like buying air, nothing tangible. The best financial advisor is yourself.