Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 231

Become an informed user of retirement expertise

  •   Don Ezra
  •   14 December 2017
  •      
  •   

You don’t need to become an expert on retirement. You deal with doctors, lawyers, all kinds of experts, and you still cope. What you need is enough information to work with them, to know how to help them to help you. They provide the expertise. All you ought to be is an informed consumer of their expertise.

That means two things.

First, you need a framework. When you see pieces of a jigsaw puzzle, you wonder how they fit together? It helps a lot if you have the cover of the box that the puzzle comes in, with a picture to show you what the whole thing looks like when it’s complete. If you have that picture, it becomes easier to see where any one piece of the puzzle fits. Here’s how I suggest you should feel:

“Now I know how to think about the issues connected with this phase of life. I now have more knowledge and it has helped to shape my opinions and attitudes. I know what questions to ask, and so I’m more likely to get useful answers. It’s not really as complicated as it’s made out to be. And because of all of that, I’m in control. I’m setting my own path to a happy, comfortable time of life.”

Second, what does it mean, exactly, to be an informed consumer of expertise? It means you can do three things, when an expert tells you something, or gives you advice or makes a recommendation.

The three things you can do

1. Assess the expertise. If you don’t understand the advice of the expert, say so, and make sure it is explained to you in a way that you understand.

2. Challenge the expert. Get the expert to identify the principles behind the recommendation. Make sure you are told about any research that underlies the recommendations. Where does the research come from? Is the evidence based on what has happened in the past? What assumptions is the expert making about the future? What could go wrong? How would the recommendations work out if the future doesn’t evolve in the way the expert has assumed? You need to be able to make that sort of a challenge, and get straightforward answers to assess whether you’re comfortable with the risks.

3. See how the advice applies to your own situation. That’s the area in which you are the expert. You know your own situation better than the expert does. To make the expert’s advice as good as it can be, you need to be able to convey the elements that define your situation to the expert. That way, the recommendation can be tailored to fit you, rather than just being off the peg. Not that ‘off the peg’ is necessarily bad. But the more the expert knows about you, the better the fit is likely to be.

The expert on any other subject is, in fact, an informed consumer of your own expertise about your particulars. So, explain your situation, and the expert can make the advice fit you as well as possible.

Paint a picture of success … and failure

Let me suggest two things you can do in this regard.

One is to paint a picture of success. Imagine yourself (your partner, your family, whoever) five years down the road. What would make you feel that the outcome has been good? What would make you feel disappointed? Convey to the expert what that picture looks like.

As human beings, we’re notorious for hoping for more than is reasonable. Typically, our financial ambitions far exceed our willingness to pay for them, or the amount of risk we’re willing to take. That alone is worth discussing with the expert: to see how feasible your definition of success is.

Of course, the second you should do is to paint a picture of failure. What sort of outcome, five years down the road, would make you feel disappointed? If you can let the expert get inside your head, it might be possible to detect early signs, in the future, that events are working out well or not. It might be possible to design a Plan B that isn’t too difficult or expensive to move to. The earlier the detection, the more ‘Plan B’ possibilities.

All of this should make you realise how much better you know yourself than the expert knows you. I hope this realisation will give you the courage to challenge the expert’s advice – something you might otherwise be afraid to do, because after all, they’re the expert, right, and what do you know? You know yourself, that’s the answer. You deserve to fully understand recommendations before they are implemented. And so, raise issues with any expert whose advice doesn’t make you comfortable.

 

Don Ezra has an extensive background in investing and consulting, and is also a widely-published author. His current writing project, blog posts at www.donezra.com, is focused on helping people prepare for a happy, financially secure life after they finish full-time work.


 

Leave a Comment:

     
banner

Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Australia’s bounty: is it just diversified luck?

Increases in commodity prices have fuelled global inflation while benefiting commodities exporters like Australia. Oftentimes, booms lead to busts and investors need to get the timing right on pricing cycles to be successful.

Meg on SMSFs – More on future-proofing your fund

Single-member SMSFs face challenges where the eventual beneficiaries (or support team in the event of incapacity) will be the member’s adult children. Even worse, what happens if one or more of the children live overseas?

Latest Updates

Investment strategies

Five features of a fair performance fee, including a holiday

Most investors pay little attention to the performance fee on their fund but it can have a material impact on returns, especially if the structure is unfair. Check for these features and a coming fee holiday.

Interviews

Ned Bell on why there’s a generational step change underway

During market dislocation events, investors react irrationally and it should be a great environment for active management. The last few years have been an easy ride on tech stocks but it's now all about quality.  

SMSF strategies

Meg on SMSFs: Powers of attorney for your fund

Granting an enduring power of attorney is an important decision for the trustees of an SMSF. There are alternatives and protections to consider including who should perform this vital role and when.

Property

The great divergence: the evolution of the 'magnetic' workplace

The pandemic profoundly impacted the way we use real estate but in a post-pandemic environment, tenant preferences and behaviours are now providing more certainty to the outlook of our major real estate sectors.

Shares

Bank reporting season scorecard May 2022

A key feature of the May results for the banking sector was profits trending back to pre-Covid-19 levels, thanks to lower than expected unemployment and the growth in house prices.

Why gender diversity matters for investors

Companies with a boys’ club approach to leadership are a red flag for investors. On the other hand, companies that walk the talk on women in leadership roles perform better, potentially making them better investments. 

Economy

Is it all falling apart for central banks?

Central banks are unable to ignore the inflation in front of them, but underlying macro-economic conditions indicate that inflation may be transitory and the consequences of monetary tightening dangerous.

Sponsors

Alliances

© 2022 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.