I woke up this morning to a financial “headline” that, while not uncommon, grated on me even more today. It’s a misleading question, asked not by a curious consumer but by a massive financial institution, that is surely designed to act as a lure for transactional sales more than a tool for educational edification.
The seemingly harmless question that inspired this rant—I mean, post:
“Should I buy gold?”
But that’s the wrong question. In fact, just about any financial question that starts with these three words is likely nothing more than a sales pitch waiting to happen.
Should I buy…
- Gold?
- ETFs?
- Apple?
- Nvidia?
- Bitcoin?
- Annuities?
- Mutual funds?
- Private equity?
- Individual stocks?
- Rental real estate?
- A revocable living trust?
- Long-term care insurance?
- Private placement life insurance?
- Long-term disability income insurance?
Here’s why this question is problematic. It’s a what question before why, or perhaps more importantly—who—has been addressed.
There’s a super-simple, super-effective executive coaching method called “Who, What, How,” and it’s highly applicable here. Coaches—and financial advisors—tend to be solutions-based people. Many got into their roles because they like problem-solving and have a bias to action, but this can lead to a proliferation of activity without sufficient purpose.
The result is that there’s too much doing and not enough deliberation out there. Meanwhile, the world’s best-known investor, Warren Buffett, advises, “Lethargy bordering on sloth remains the cornerstone of our investment style.”
We ask too many what and how and not enough who questions. And here’s why the distinction is so important:
The who will always show up at some point.
When the personal purpose of an investment is not determined in advance, it will ultimately be questioned. “Wait, why did I buy this again?”
“Should I buy” questions are the reason that many investors end up with more of a collection of disjointed securities rather than a purposeful portfolio. And it’s why the “behavior gap”—the fact that investors don’t receive returns as high as their investments—is so persistent.
So, what would it look like if we took more of a who approach, even if our objective was to determine if gold—or any particular investment—was appropriate for an investor? Let’s try these on:
- How would you define financial success?
- What is your overall objective in investing?
- Tell me about your investment experience thus far—what has worked, and what hasn’t?
- What keeps you up at night from an investment perspective?
- How do you think about allocating money in the short and long term?
- How does your investment strategy align with your goals in life?
- Which statement do you align more with: Save for tomorrow or live for today?
That said, I prefer even less categorial questions that do more to reveal who a person is at their core and what’s most important to them in life. In fact, if I’m meeting someone for the first time, even if the end objective is as specific as portfolio optimization, I may gather the most important information armed with these three simple prompts or questions:
- What brings you here?
- Anything else?
- Tell me more.
They’re not very flashy, but they are purposeful. The first question is the opposite of leading—it’s open-ended. The second question is designed to broaden the conversation to ensure nothing is overlooked. And once everything is out on the proverbial table, the third question deepens our understanding, illuminating what’s most important.
When we understand what’s most important to someone personally, we can simplify even the most seemingly complex financial issues. For example, suppose someone’s primary financial goal for the future is growth to outpace inflation. In that case, the question “Should I buy gold?” becomes easier to answer—considering that, despite its all-time high sticker price, on an inflation-adjusted basis, gold is worth less today than it was 44 years ago. 😊