It’s quite easy. Go to any Private Bank, Bank, Building Society, IFA, Wealth Manager, they will all say, “PICK ME PICK ME. We are the best.”
Whilst the people who work for these firms are friendly (they have to be), intelligent and look the part, everyone has a story about why you should choose them. Think of them all as a herd of Zebras.
Its what we call the Zebra effect. “A state of mental dating distraction. It occurs when an individual on the make is presented with too many equally attractive choices at the same time. Similar to the sensory overload experienced by a lioness crossing open ground to advance on a heard of zebras. The end result is often missed opportunity and frustration” (Urban Dictionary)
They all look the same. Their services all sound the same. And if you were a lioness, it doesn’t matter much who you catch, you’ll still get meat. As an investor, if you invest with any of the Zebras, you’ll still get a return. So whichever Zebra firm or person you choose does not matter. Right?
If you have £1m, what do you want? You’ll expect a good return on your money? You’ll also expect to be treated well. These are important to you. But what do the Zebras want? How do they see you? Whilst you like to think they will give you a good return on your money, they make more money by simply handling your money. Often the more of your money they can manage, the more they make. It’s not payment by results. As such, your interests are not aligned. If they make you 10%, you’ll probably stay with them, If they make you 1% or lose your money, you might find another Zebra. When you ask the Zebras, how do they invest your money, each Zebra will tell you how they are different and better than the others. It’s hard for you to choose when they all look the same! It’s understandable why investors can’t differentiate and end up making ‘gut’ based decisions in the hope they will be right.
But there is life beyond the herd.
So how do you invest £1m? It’s simple. Hold cash deposits.
That may sound stupid. I know that most people invest for the long term, as such, cash is not really appropriate, but its more important to get investing right rather than swap and change which often happens for most investors as the thinking has been rushed. My point, it does not matter if it takes you 12 months or more to do your thinking. That is much better than quick poor decisions.
So, invest in cash, then learn, discuss, test your ideas before you commit real money. It’s important not to let the Zebra’s persuade you how they invest your money and why it’s the best for you to invest now. Instead, your focus is more on getting to know the Zebra. Whilst the Zebras want you to invest immediately, (its how they make money), instead, take your time. By rushing into investing your money before you really understand what you are doing, you increase the chances of making a bad decision. Bad decisions cost you money, not the Zebras! By getting to know the Zebra, you educate yourself about how they work. You make sure you better understand how investments work. And if you don’t understand what they saying, simply don’t do it. Wait until you do understand.
If you happen to be already invested with a Zebra and you are not sure if it’s a right fit, simply keep the investments but sack your advisers. Then you can go through the process above of educating yourself by talking to different Zebras. At worst, if you can’t find a better option, you can reemploy them. It also means you are in the driving seat.
I met recently with a new client. We talked about ‘thinking’. He said it’s a pity that people didn’t apply more thinking before taking action. I could not agree more.
As for holding cash deposits. It’s not forever; it’s until you are very clear about when you should diversify. The key point, Zebras are experts in persuasion. They want your money today. Do your thinking first.
Request your 30-minute consultation today here as there is life beyond the herd.