Content provided by Rusty Vanneman, CLS Chief Investment Officer
Economist Robert Shiller has been an influential thought leader in the financial industry for some time now. His recent Nobel Prize win was well-deserved and will only help broadcast his thought-provoking messages to a larger audience.
Recently, Shiller was speaking at a conference and made some powerful comments that CLS strongly believes in as well. In short, everybody should have a financial advisor. “People make better decisions with financial advisors.” He equated the importance of financial advice to medical advice. He even felt that the lack of good financial advice was a contributing factor to the recent financial crisis.
Shiller also scolded the advisors who weren’t willing to tell clients that they are making mistakes in the fear that they might anger the client and lose the business. He recognized that it’s not easy to tell clients that they might be wrong in their thinking, but it’s the right thing to do for all parties concerned. Advising clients is so much more than simply manufacturing a financial plan and a rate of return. It’s about counseling and managing investor emotions. Shiller also mentioned that if advisors had unlimited time that they should pursue a second degree in psychology to help manage investor emotions to help prevent financial and investment mistakes.
The controversy from his remarks came from his view that financial advice should even be subsidized for everybody, and not just be available for the wealthy. This has created a stir of commentary, both good and bad on the topic. This provocative idea isn’t likely going to happen (at least anytime soon), but it underscores and boldfaces a basic truth – that investors do better with good advice.