The Value of Advice—in Basketball and Investing
In June 1987, I received a dream phone call. “Hey, Dave, this is K. C. Jones and Red Auerbach,” the two Boston Celtics Hall of Famers said. “We just drafted you, and we’ll see you in camp next month.”
It would change my life . . . just not in the way I thought.
Due to labor negotiations between the National Basketball Association and the Players Association, training camp never happened. Instead I played professionally in Turkey, got injured, and pivoted from the hard court to pursue a career in finance. Now I’m the Co-CEO at Dimensional Fund Advisors.
But the lessons I learned during my athletic career have carried through to this day. Especially the importance of having a second set of eyes to help you succeed. You’re at your best when someone you trust provides perspective that you may not be able to see on the court.
That’s why, for close to three decades, I’ve relied on a financial advisor. Investing for the long haul requires a certain amount of help. Yes, you need to maintain a low-cost, well-diversified portfolio appropriate for your personal circumstances and risk tolerance. But perhaps more importantly, a successful investing experience requires the discipline to stick with that approach through market ups and downs.
Such self-control can be tested daily. After all, we’re people, and people have human reactions to market-moving events. Fear of missing out on the next big thing, or a desire to protect yourself from the most recent crisis, is only natural.
The key is to find a way to guard against flashy headlines influencing your financial game plan.
As a former professional basketball player, I like to think of the value of a financial advisor through three roles familiar to any sports fan.
General manager: A general manager for a sports franchise doesn’t just try to win today; they set up their team for success season after season.
The same is true for a financial advisor. My advisor started out as my accountant. But the more I got to know and trust him, the more comfortable I felt in letting him handle all the financial complexities that inevitably pop up as you get older.
A good long-term financial experience begins with an investment philosophy and plan that you can understand and stick with through wins and losses. If you understand this philosophy, you’re better able to contextualize and cope with the inevitable day-to-day market fluctuations.
My financial advisor and I don’t speak on a regular basis about what’s in the headlines; our conversations are focused on my family’s goals for the next few decades. He is our steward.
This type of relationship stands in stark contrast to the transactional one I previously had with a stockbroker who was only interested in earning a commission on my trades.
Talks with my advisor have always been broader than asset allocation, incorporating issues like saving for college, tax planning, and charitable giving. And part of those discussions includes the future beyond my needs. My financial advisor helps my family achieve a mutual understanding of the purpose and dynamics of money and provides expertise and support for intergenerational financial security.
Coach: As someone who played for the renowned college basketball coach Lou Campanelli and was drafted by Red Auerbach, I know the value of great coaching. Principles including discipline, personal connection, and commitment are paramount.
Your financial advisor should have these traits in spades. The best advisors stay connected in all types of markets—but especially during uncertain times. They reiterate financial fundamentals and investment principles within the context of research-based market truths.
Over time, you’ll gain historical perspective and relevant insights into building lifetime wealth, while connecting how your emotions and biases can distort expectations and spark bad decisions. Your relationship will develop as well. It will become deeper, as your advisor becomes more aware of your family dynamic.
My financial advisor truly understands me and my wife and knows our feelings around investment and money. He knows what my kids are studying at school and who they want to be when they grow up. He’s a friend. The advisor-coach is there to instill financial discipline in both good markets and bad.
Player: In addition to providing long-term guidance and drilling the fundamentals, my financial advisor also executes the plays.
Many people lack the time or desire to implement what advisors do daily. This includes, but is not limited to, portfolio monitoring and rebalancing, account administration, tax management, and coordinating with other trusted professions (such as accountants and estate planners).
I’d much rather spend my free time enjoying life with my family and friends than worrying about those things.
By separating yourself from these important financial responsibilities and leaving them to professionals, you gain greater peace of mind and a better quality of life. So if your financial advisor is the general manager, coach, and player, what does that make you?
The owner.
The greatest sports-franchise owners delegate the duties of running a team, while the least successful tinker beyond their expertise.
The same principle applies to managing your finances.
All of those dollars you’ve earned and saved represent sacrifice—forgone temporary enjoyment in service of a better future for you and your family. I’ve decided to entrust the care of those thousands of sacrifices to a professional. As my friend, and academic luminary, Ken French said about his financial advisor, “It’s the best check my family writes every quarter.”
This article originally ran in MarketWatch.
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