Over the past 45 years there have been thousands of times where I have been asked for my professional opinion on some proposed business or investment opportunity. Usually there are three factors or classes of information that go into the opinion. The first class of data is the technical data such as rate of return, risk, location, nature of the investment, dollars needed, expertise needed, etc.
The second class of information is the character of the investor. This one may surprise you. Any particular investment may be fine for one person and not good for another. There have been hundreds of times when I have seen a perfectly good technical decision go bad because the personality of the investor did not fit the investment. For example, the investment in mutual funds by an investor who could not stand to see his investment lose value and therefore sold at the worst time. Or the real estate investor who absolutely hates dealing with renters and becomes a nervous wreck worrying about the property. So I always try to make sure the business or investment decision matches the person.
The third class of information is the “general principles” class. These would be things like, is the dollar amount needed just too much of the persons assets, or is there enough diversification in their investments, or is this kind of asset just too hard to deal with? These general principles are the hardest to convince a client to apply. When the other factors look good it is hard to say no just because, for example, you have too many of your eggs in one basket. But oh, how many times I wish they would have listened.
So when looking for an advisor, look for someone wise enough to apply all three types of information to your decision and then, may I say it, listen to their advice.Loren L McCann, CPA, MS(Tax)