(This article is reposted with the permission of the author. It was originally published here Boomer & Echo.)

I doubt very much you’re asking your financial advisor enough questions, and are worse off because of it. I think I’ve got a handle on why – let me see if any of this rings a bell:

You don’t have enough time: It’s tough to commit time to an appointment when there are so many other things crying out for your attention, let alone committing to another appointment if you don’t feel right about the first one. You’re also deeply polite and don’t want to take up too much of the advisor’s time.

You don’t have enough confidence: Heck, this is why you’ve got an advisor in the first place, because that person across the desk from you has more experience and is probably smarter than you, right? If you ask questions, they’re going to think you’re an idiot.

You aren’t rude enough: Asking a financial advisor why he’s recommending a particular fund or portfolio feels kind of aggressive. Pressing him for answers to your actual questions until you get them isn’t the way you were raised.

You don’t know enough: How will you evaluate the truth or accuracy of what you’re told if the whole reason you’re asking questions is because you don’t know the answers?

Am I right? At least in part? It’s really, really difficult to head into a meeting with a financial salesperson, knowing that you don’t know very much about investing, knowing that what happens to your savings is important, knowing that time is limited, and feeling as though your only two options are to ask questions about things you don’t understand until you understand them or to nod politely and buy whatever you’re sold.

That person across the desk from you might be the perfect financial advisor for you, but you can’t know that until you start asking questions, and I’ll warn you: a terrible advisor might sound an awful lot like a good advisor to someone too intimidated to ask.

Over the years as both a financial advisor at the bank and now as an advice-only planner, I’ve devised a very simple test to separate the wheat from the chaff: The best way to tell the difference between a good financial advisor and a bad financial advisor is to literally test their patience by scrutinizing fund documents right there in front of them while they wait.

You are paying – indirectly, often, but still paying – for this advice. Bad advisors forget that all the time, and start believing that you’re paying for their expertise rather than their assistance. If you get any sense that you’re wasting their time with your careful questions and document scrutiny, you’re getting a pretty good signal that you’re just a money delivery system and should probably run to your nearest T2033. 

So this is what I want you to do:

1. Ask about any term that you don’t understand: this includes MER, risk premium, value, forward P/E ratio, trailing returns, interest-rate risk, Andex chart…anything. Bring the conversation to a screeching halt anytime you hear something you don’t understand.

2. Ask to see the Fund Fact Sheet for every single investment you already own and every single investment that’s being recommended for you. Actually read each one of them, right there in the office, spread out beside each other. Look at the Management Expense Ratio and Total Expense Ratio, and figure out how much you’ll pay annually for the amount of money you have (or will have) invested. Look at the top ten holdings, the asset allocation, and the management style. Ask any question that occurs to you.

3. Zero in on the performance in the last ten years. If there isn’t a benchmark listed on the Fund Fact documents, ask your advisor to show you how the funds performed compared to other funds with similar holdings or strategies on Morningstar.ca.

4. Ask what job each fund is meant to do in your total investment portfolio and why each one, in particular, is there instead of any number of other funds that could be in its place.

I can’t promise that this one set of questions will result in an immediately deeper investment knowledge or a magically better portfolio, but I dearly hope that it will prompt you to start asking your own questions, to evaluate the quality of the advisor by their willingness to have open dialogue, to grow in confidence until you get answers (or research your own), and to commit to an investment strategy, fund, or portfolio with your eyes open and your critical thinking skills engaged.

A colleague said something amazing to me a while back that I’ve been mulling over ever since:

Planning for your eventual departure is truly one of the most loving and thoughtful things you can do for your family and friends

If planning for the day when you shuffle off this mortal coil is a gift you can give to the ones who will miss you, isn’t planning for the day when you get sick or lose your job, an equally loving and thoughtful gift...for yourself?

I think it is, so today, I’m carrying on with my 2019 theme by applying design thinking to emergency-preparedness.

For those of you who haven't been with me through the whole series, design thinking is an intentional, methodical, you-focused process of creating solutions that work for your unique circumstances, values and goals, and it starts with:

Empathize

Set aside your own assumptions about the world and gain real insight into alternate perspectives.

Personal Finance 101 says that you protect yourself from risk by establishing an emergency fund and buying proper insurance, and I’m not arguing against either thing. I am, however, arguing that instead of jumping immediately to a solution, we start by fully fleshing out the problem.

The goal of this whole exercise is to be kind and thoughtful to your future self. So: who is that person? What distress are they in? Your life can be upended by a lot of things, but most can be grouped into one of two categories: losing income (think closures, layoffs, illnesses, and injuries) or gaining expenses (think big repairs, essential replacements, medical treatment or drugs your province doesn’t cover, childcare, and housekeeping).

In this first step of the design thinking process, your job is to empathize with how any permutation of these circumstances would affect you and your family. Fire up your imagination and think about:

• How would your house stay clean and safe?

• How would your pantry stay full (and miraculously turn its contents into meals?)

• How much money would hit your bank account? In what circumstances might you be eligible for social assistance, employment insurance, or existing private or group insurance benefits like disability or critical illness?

• How much money would it take to stay safe and happy?

• If you have savings and would need to dip into them, how would you replace the money? If you have to borrow money, how much would you have to repay and for how long?

• Who could you rely on for help?

Remember, at this stage you’re not solving anything, you’re just imagining yourself in these scenarios, What we’re looking for here are observations like:

• I think I’m the only person in my house who knows how to turn ingredients into food so there’s going to have to be a lot more prepared stuff if I’m out of commission

• I just moved to this town and don’t know anyone yet...and there’s no way I could get up the stairs to my apartment by myself if I broke my leg

• That disability benefit looks awful low compared to what I know I need to pay the mortgage and buy groceries

• If I couldn’t look at a screen for longer than ten minutes how on earth could I keep freelancing?

Paint a picture of your future self in distress. What do you need to be safe and happy?

Define

Use the information you gathered in step one to define the core problems you’ve identified.

After imagining yourself fully in catastrophe mode, you might be feeling a little nonplussed at this point. That’s good! We’re going to use the empathy you have for your future self to take really good care of her/him, I promise.

While the last stage was about identifying problems, this one is about - you guessed it - defining them. Turn your observations into defined problems, like so:

• I’m the only person who can turn ingredients into food...so future, distressed me would feel better with an extra $200 a week to spend on prepared food

• I don’t know anyone and can’t get up those stairs...so future, distressed me would feel better with someone or a group of someones to trust

• I won’t be able to pay the mortgage and buy groceries...so future, distressed me would feel better with an extra $1,200 a month to bridge the gap left by insurance

• I rely entirely on my brain + screens to earn income...so future, distressed me would feel better with disability insurance and time to figure out and implement solid, healthy workarounds

Ideate

Brainstorm solutions, without editing or limiting yourself.

You’re probably still in “Oh, sh*t. What am I going to do?” mode at this point in the process, and after two whole steps of telling you not to try and solve anything yet, here’s where you let your solution machine loose.

Throw out all the ideas, whether you think they’re realistic or not. Here, I’ll get you started:

• Easy mode ideas:

• Buy disability insurance

• Buy critical illness insurance

• Save an emergency fund

Boss mode ideas:

• Find a community organization doing something you’re interested in, and start going (bonus points if you show up on your first day like this:

(comic credit)

• Figure out exactly how much money you need to cover your essential expenses + some minimum comforts

• Learn how to cook from low-cost, shelf stable ingredients (like Jack Munro teaches)

• Campaign for a universal basic income (this one’s a long-term play, I grant you)

Prototype

Investigate solutions

Here’s the really practical step: can any of the solutions above work?

Find out how much all that insurance would cost. Check your group benefits at work and what your EI entitlement might be. Calculate how long it would take to save up an emergency fund. Seek out community organizations and investigate what they’re all about and what your commitment would be to them. Check out recipe books from the library and inventory your kitchen to see if cooking at home is going to cost you resources you already don’t have.

This is the point at which you might call in your friendly neighbourhood financial planner to envision how all these solutions might work together (or just to navigate the world of insurance, which isn’t something I sell but definitely something I understand).

Test

Practice those solutions.

Remember step one, when you imagined your future distressed self and tried to understand what would make her feel better? Now you’re going to pretend to be her.

Now, don’t get me wrong, I don’t want you to throw yourself down a set of stairs so you can test how your emergency-preparedness plan works...but I do want you to try and live without all of your current resources to see if it’s possible.

One of the fundamental skills that every person should have (provided that person has enough to be safe and happy already) is the ability to switch to an essentials-only budget on a dime. In a stressful situation, do you want to also be learning a system for imposing boundaries on your spending?

Answer: You do not.

So here’s a challenge for you: now that you know how much you’d receive from a disability insurance policy, for example, could you actually operate your life with only that money within the community of friends and family you already have? Try transferring the excess to a separate account for three months and see how you do (remembering, of course, that since you know this is self-imposed, the effect on your mental health and stress-levels might be very different in a live emergency).

As you observe the results, you may find new worries to add to your empathy list. You might define new problems. You might, in fact, need to go back to the drawing board. But you’ll be better prepared than you were before you started, with applied design-thinking to make it better every time you revisit it.

Any book that promises to help me get better at something important, and that the work will be hard and take time (possibly even a lifetime), is a book for me. I stumbled across We Need to Talk by Celeste Headlee while I was browsing through my library’s e-book app¹, and am I ever glad I did!

Headlee is an accomplished interviewer, and had every reason to believe she was great at having meaningful conversations with all sorts of people. Turns out even a professional radio host has room for improvement. No one should be surprised to find out that I personally have plenty of room for improvement.

The first section of We Need to Talk is a meticulously crafted case that good conversation is vitally important, and that all of us have room - lots of room - to get better. The second section is designed around ten specific strategies Headlee identifies that can improve communication, and she encourages readers to choose one strategy at a time to work at consciously, rather than trying to get better at everything all at once.

Who should read it?

Everyone should read Celeste Headlee's book, but in particular anyone who - like me - thinks they’re actually a pretty good conversationalist, thank you very much. There’s so much we insufferable know-it-alls can learn if we just get better at listening!

If you only have time to read one chapter:

Definitely read “Some Conversations are Harder Than Others.” This was a chapter that stopped me in my tracks, since it’s about very tough conversations and how worthwhile they can be.

This chapter is also important because in it, Headlee lays out the five key strategies that help facilitate productive dialogue:

1. Be curious: have a genuine willingness to learn something from someone else without the intention of educating them or proving them wrong.

2. Check your bias: remember that listening to someone doesn’t mean agreeing with them.

3. Show respect at all times: focus on the positive intentions of the other person and try to see them as someone trying to accomplish something they believe to be good.

4. Stick it out: sometimes, just learning what someone else thinks is satisfactory, even if all you do is listen.

5. End well: Let go of the impulse to have the last word, and express gratitude that the other person shared their thoughts with you.

I’m glad Headlee doesn’t present these as a quick recipe for good conversations, because becoming the kind of person who can follow these strategies consistently is going to mean a lifetime of paying attention.

If you only have time to read one paragraph:

“One of the best lessons I’ve learned in nearly twenty years as a journalist is that everyone has something to teach me. If you can find it within yourself to stop using conversations as a way to convince people that you’re right, you will be stunned at what you’ve been missing. A flood of information will rushi in to fill the vacancy left behind by your ego. You might be overwhelmed with knowledge, perspective, insight, and experience. You’ll hear stories you had refused to hear because you were too busy stating and restating your case. If you enter every conversation assuming you have something to learn, you will never be disappointed.”

(Chapter 8: Get Off the Soapbox)

If you only have time to read one sentence:

“As they say, the mouth shuts, the ears don’t, and there’s a good reason for that.”

(Chapter 7: It’s Not The Same!)

¹ This is also the reason I don’t have page numbers for you!

Summer is, as you know, a great time for leisurely long-form reading, but if you’re looking for some smaller bites, then I’ve got just the platter for you in this month’s top reads. I start with some really great thoughts on happiness and success from Lisa Walsh, Julia Boem & Sonja Lyubomirsky. My friend Chris Enns shares some great insights on pain, rebuilding, and growth in a recent post from his own practice at Rags to Reasonable. Following that, Josh Brown has a quick-and-to-the-point summary of what we need to get used to when dealing with the markets, whether we like it or not.

If you have room for dessert, then of course there is more to sink your eyeballs into, with the psychology of passive barriers, the usefulness of procrastination, some introspective, forward-thinking about what we really want out of life, a case study of bond ETFs vs GICs, and tips on how to win any argument about the markets - if that’s really what you’re after. Happy reading!

Happiness doesn't follow success: it's the other way round 

From Lisa C Walsh, Julia K. Boehm, & Sonja Lyubomirsky

 “The philosopher Bertrand Russell in 1951 said that: ‘The good life, as I conceive it, is a happy life.’ But he went on: ‘I do not mean that if you are good you will be happy; I mean that if you are happy you will be good.’ When it comes to making your mark at work, we agree. If you want to be successful, don’t hang around and wait to find happiness: start there instead.”

Read the full article here.

The Cost of Stability & The Hidden Life of Trees

From Chris Enns

“My process of learning how to be stable started as I moved out on my own. And it included a whole lot of painful mistakes...

"But that pain isn’t failure. It’s a message of what needs to be strengthened. The reframing of that is a powerful message for me, since instead of something to ignore and be ashamed of, it’s something to notice and bring into the light.”

Read the full article here.

Get used to it

From Josh Brown

“That’s how it works. It’s not meant to be intellectually satisfying. It’s meant to take money away from people who think they can explain things. Worst traders and managers I know are the guys with answers for all this stuff.”

Read the full article here.

You can read this month's entire list below:

The psychology of passive barriers | Ramit Sethi

“There's something especially annoying about comments on personal-finance blogs. On nearly every major blog post I ever made, someone left a comment that goes like this: “Ugh, not another money tip. All you need to know is: spend less than you earn.”

"Actually, it's not that simple. If that were the case, as I pointed out above, nobody would be in debt, overweight, or have relationship problems of any kind. Simply knowing a high-level fact doesn't make it useful. I studied persuasion and social influence in college and grad school, for example, but I still get persuaded all of the time.”

Celebrating an Investor’s Obituary | Gatis Roze

“We investors must choose wisely in making investments, but we should understand the reasons for doing so — why we chose what we did. An unwillingness to do so would be like living in a house without windows.”

Why procrastination is not a time management issue | Sam Kemmis-Zapier

“When we’re putting off work, we tell ourselves we’re being ‘lazy’ and that we need to ‘suck it up’ to power through the task at hand. But the research suggests that taking a softer, more compassionate view of our own behaviors may be the key to breaking out of this self-perpetuating spiral.”

GICs vs. Bond ETFs: A Case Study and Bold Adventure | Justin Bender

Ever wonder about when and why to use GICs instead of Bond ETFs or vice versa? Justin has you covered with a clear after-tax comparison of both.

How To Win Any Argument About the Markets | Ben Carlson

“You can win any argument about the markets by simply changing your start or end dates to suit your stance.”

There are a lot of reasons for people to feel a bit wary when it comes to the wide, wide world of personal finance. Whether it’s the quality of advice you receive, the level of precision required for RESP contribution strategies, or what you’re supposed to do with digital assets in your estate, there’s a lot to know. Thankfully, John DeGoey, The Loonie Doctor, and Katharine Schwab all have thoughts to share with you this month.

If you’ve still got a few minutes after reading through those, Dirk Cotton has some words of wisdom about the unreliability of any kind of financial prediction, and Emma Pattee provides a really thoughtful discussion on the meaning of success and how her family of origin influenced her perceptions. My friend and fellow advice-only planner, Owen Winkelmon, wrote a concise summary of 7 ways to split income with your spouse, which can be a great way to increase your family net income.

Finally, if you’d like to get a good handle on your appetite for risk but find those questionnaires a little much, RiskLiteracy.org, a nonprofit university-based project, has a 2 minute test (in multiple languages) that can help you get to know how well you understand risk and the math used to express it. Happy reading!

Misinformed Consent

From John DeGoey

"If the intentions are good, but the advice is nonetheless bad, how do we characterize the acceptance and implementation of that advice? Would your opinion change if the person giving the unwittingly bad advice refused to change the advice once the error in her ways was pointed out to her?"

Read the full article here.

Optimizing a Lump Sum RESP Contribution Strategy

From The Loonie Doctor

“You don’t need the precision required to fire proton torpedoes into the exhaust of the port of the Death Star. Again, the biggest mistake people can make with an RESP (besides getting sucked into a fee-laden and restrictive group plan) is holding on too long before pulling the trigger.”

Read the full article here.

How Facebook is designing for an incoming avalanche of dead users

From Katharine Schwab

"Facebook isn’t the only company that will face a conundrum about what to do with its droves of user data when those users pass on. The challenges facing the company reflect the tech industry’s larger problem with designing for endings–whether it’s the end of a product’s life or the end of a user’s life."

Read the full article here.

You can read this month's entire list below:

Black Holes, the Higgs Boson and Retirement Planning | Dirk Cotton

“Retirement models, whether mathematical, spreadsheet, or Monte Carlo simulation, can't predict the future the way models do in the physical sciences.”

I'm more proud of my marriage than I am of my career | Emma Pattee

“I interviewed a financial psychologist last year for an article I was working on, and he told me that every time my husband and I make a decision about money, we aren’t the ones making the decisions, our grandparents and great-grandparents are."

Different Ways to Split Income With A Spouse | Owen Winkelmolen

Owen is out here consistently writing some of the clearest summaries on big, sprawling topics.

Risk Literacy Test | RiskLiteracy.org

How risk-literate are you? That is, how easy is it for you to understand probabilities and use them to inform your choices? Here’s a short test you can use to assess your risk-literacy.