Let's assume that you are aware of the importance of financial planning and want to find the right financial advisor. However in this information age, you also think that getting information about financial products is easy. This leads to the critical choice between finding a financial advisor and doing it yourself.

This series points to some relevant links and articles on finding the right advisor or doing it yourself.

To start with you can visit this page about Advisors that has been posted by Ranjan Varma. You can also read previous articles on financial advice here

Beware of Experts

There are many people positioning themselves as experts who do not really have expertise. And it’s a fact that we tend to follow the most confident among us, regardless of how reliable and/or contradictory their views are.

Here’s an interesting study that I read here: Excerpts:

…..This tendency to be seduced by confidence was demonstrated a few years back by psychologist Don Moore, who gave volunteers in a study real cash for correctly guessing people’s weight after looking at pictures of them. But the study had a twist: Another group of volunteers served as “experts,” and the guessers could buy advice from these pros as the study progressed. The experts, it’s important to know, could spread their estimates along a wide or narrow range depending on how confident they were about them. So an unconfident expert might have said that there was a 25% chance a person’s weight was 170-179 pounds, a 25% chance it was 180-189, a 25% chance it was 190-199 and 25% that it was 200-209.

A highly confident expert, on the other hand, might reckon the pictured person’s weight as 100% likely to be between 180 and 189 pounds. Not surprisingly, experts who proved poor judges of weight were generally avoided as the experiment moved from round to round.

What didn’t make sense was this: When inept experts stayed confident — that is, when they kept their estimates limited to a narrow range of weights even as they were consistently wrong — volunteer guessers kept buying their advice.

One lesson here, as we’ve written, is that in a gray world, we like black and white answers, even when we have good reason to doubt their accuracy or relevance.

Another lesson is that it’s tough to ignore drumbeats. That is, the more often an opinion or viewpoint is voiced the more we assume it to be prevailing and, likely, reliable. Indeed, in a series of experiments a few years ago, marketing professor Kimberlee Weaver and colleagues showed that this tendency remains in force even when we know the “widespread opinion” is simply being repeated by the same person. Keep this in mind when you here someone confidently and repeatedly explaining why gold is the ultimate inflation hedge (doubtful) or why immigrants are taking millions of jobs from Americans (highly doubtful).

Stay tuned for part 2 of this series of articles on finding the right advisor or doing it yourself. You can also read previous articles on financial advice here

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