Who is the Expert Anyhow?

I almost had a client the other day, a dentist.   We had talked a few times but had not ever gotten down to the nitty-gritty, setting goals. It’s the most important thing I do, the same thing a financial planner does before you start buying investments. Only when we go through a goal-setting process first can we then figure out what loan program helps meet those goals. They didn’t want to do this with me here in my office, but wanted to do it at home, by themselves. So I reviewed with them what they were to consider in their goal-setting.

Bottom line, they didn’t know how to do it themselves so they did nothing. After eight weeks of silence, I finally got a call asking me to “bid” on a Jumbo 30-year no-cost loan, the most expensive loan our industry offers.   I know enough about them to know that this is probably the worst combination. There is no way they could have established their goals rationally and then come up with that loan! So I’m wondering how they did it.

Well, it turns out that several of his dentist friends had just gotten that same loan, the Jumbo 30-year fixed rate no-cost loan and, ultimately, he decided that it was better to get financial advice from dentists than me.  I didn’t have my feelings hurt, but it does make me wonder about people and the dumb things they do.

It’s not that I don’t like dentists. My own dentist is a good friend and I put a lot of faith in him to keep my teeth and gums in proper shape. He’s the expert in that field.  In return, I have earned his trust in my area of expertise and he came to me for financing when he bought his home.

I think that the value of expertise is often overlooked in many areas of endeavor. In fact, Americans have always seem to have conflicted relationships with experts.   Certainly, at the height of the dot-com era millions of people shunned their stockbrokers and started buying and selling their stocks through discount trading companies.  

The HMO’s were supposed to be a shortcut to cheaper medicine.   Tax preparation software is cheaper than hiring a tax preparer.   Do-it-yourself wills and trusts are available on CD.   You can buy pills more cheaply from an Internet pharmacy based in Canada .  

The sad thing is that most people find out the hard way that these cheap solutions that left out the expert can be very expensive in the long run.   The last few years have been tough for every investor, but I’d guess those people who most quickly abandoned their stockbrokers lost the most money.

Similarly, did the HMO provide the best health care?   Could a CPA have saved you more taxes than his fee?   Will your home prepared will actually be legal when you die and your heirs go to Probate Court?   Do the pills in that Canadian bottle have the same potency of the ones that you get at your local trusted pharmacy? You see what I mean.

Not every field has experts. You can’t hire a consultant to advise you on tires or microwave ovens.   You don’t want to go out and spend $400 on a digital camera and find out that you bought a turkey.   You might find a salesman who will be straight with you and give you unbiased advice, but maybe not.   That’s why I am a great believer in Consumer Reports .   They give me expert advice in areas where there are no experts

I’m all for empowering consumers to make their own investment decisions, if they are well-prepared. If not,   it can sure get out of hand quickly. Most do-it-yourself mortgage shoppers are passing up many opportunities to save money.   That isn’t just my opinion.   I have talked with many, many mortgage professionals and most agree that 75 percent of mortgage shoppers get the wrong loan or pay too much for it, or both.   Hiring an expert will keep you in the other 25 percent.

So what happened to the dentist?   I don’t know because I didn’t want to play the game under his rules.   I do know that he procrastinated so long that he missed the bottom in the market and will pay at least one-half percent more on his loan than if he’d started when we talked.   That’s over $20,000 over the next ten years. So much for taking financial advice from dentists.

Be careful out there.