Sunday, September 11, 2005

IMHO: 'Expert' Opinions

There’s a commercial that seems to run pretty regularly these days that features a concerned looking man on the phone with his physician. In short order it becomes apparent that the physician is talking his patient through the intricacies of a surgical procedure, right down to telling the would-be patient where HE will need to make the incision. At that point, the understandably nervous man says, “Shouldn’t you be doing this?”

No doubt to the chagrin of whoever put that commercial together, I can’t recall the sponsoring organization. However, its message certainly resonates with any financial advisor who has been asked to justify his/her role in helping workers make financial decisions.

Much as I relish that commercial message, however, I’ve never been keen on a broad-based application of those types of analogies. Like, “You wouldn’t think of doing your own plumbing, why should you try to do your own portfolio management?” Or, “You have a mechanic to work on your car, why wouldn’t you have a professional work on your financial plan?” There is a certain clarity to those arguments – goodness knows, the days when I might even think about tinkering under the hood of my car are far gone.

On the other hand, if I had to contemplate taking my car to the mechanic every quarter, I’d get a new car (and maybe a new mechanic). Similarly, I’ll happily enlist the services of a qualified plumber when the situation requires it – but as any weekend visit to the Home Depot will attest, there are a fair number of “do-it-yourselfers” willing and/or able to undertake those types of projects (some that, no doubt, result in an even bigger project for the professionals). In sum, most of us – for a variety of reasons – do still engage in modest attempts to attend to those little household projects. None of which, as best I can determine, has diminished the role for professionals such as mechanics and plumbers in our society, certainly not on major projects.

Still, the undercurrent in many of the “automatic” solutions touted today seems to be predicated on the ability to avoid “troubling” the participant with any involvement in decisions involving the investment of their retirement portfolio, to shelter them from needing to make a decision regarding the appropriate level of savings, to shield them from the inconvenience of completing an enrollment form. An approach that seems destined, IMHO, to create a generation of savers who will barely be aware of how much they are saving, much less how it is invested. A “generation” of do-it-for-me savers that won’t have a clue if there is a problem, much less who to call if a problem emerges. Much as I might not want to deal with a major automotive disaster, I’d rather be alerted to the prospect when I still have a chance to remedy the situation. I may not relish the prospect of summoning an expensive plumber, but I’ve learned the limits of my expertise in such matters (and mastered the location of the main water shutoff, just in case).

Certainly, automatic alternatives have a place, but when it comes to financial planning, I think “automatic solutions” should be considered an oxymoron. Ultimately, I don’t need to be a plumber to replace a faucet, but having at least made the attempt, I can perhaps better appreciate the advantages of choosing to do so. Advisors should appreciate the assistance that such tools afford their education efforts – but never assume that an automatically enrolled participant is an effectively engaged participant.

- Nevin Adams editors@plansponsor.com

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