Have you seen the PBS program where Scott “The Piano Guy” Houston teaches adults who have always dreamed of playing the piano to learn to play using a simple, easy method? Whenever the Learn Piano in Flash program airs (usually during pledge week), I stop what I’m doing and watch.
Unlike my wife and kids who all play musical instruments, I have no musical talent. Frankly, I don’t have a strong desire to learn to play the piano, but I’m fascinated in how Scott Houston makes it look so easy. With his method, students don’t need long, thin fingers or even the ability to read traditional sheet music. Houston teaches a simple 1-2-3 system where you learn the basic notes, a few cords, and then can quickly play a popular tune. I don’t know how successful he has been in turning frustrated musicians into music-makers, but I imagine that half the battle is that most people don’t really believe they can do it.
While I was watching this program, it occurred to me that my clients and prospective clients might have a similar reaction to my investment advice. I tell people that they can buy a few index funds and self-manage their portfolios very effectively with very little effort. Just like with those aspiring music pupils, this undoubtedly seems too good to be true. Healthy skepticism is a good thing, but I’m concerned that it could lead some folks to seek out higher-priced products and services – or worse do nothing at all - thinking that they can’t possibly do it themselves.
There are some differences between me and Scott Houston, though. He has the advantage that many people have had exposure to music during their school days. He also teaches a subject that is naturally fun and interesting. As a disclaimer, Houston doesn’t claim that you will learn to play as well as him. He just hopes that you will learn to play the melody of your favorite song.
As a financial advisor, I have the greater challenge to convince people that participating in the capital markets through index investing, rather than trying to beat the market, will produce better results than most professionals. The world of Stocks, Bonds and Mutual Funds is as mysterious to many people as a Treble Clef is to me. Most people would rather have a root canal, than manage their own investment portfolio.
Even so, the stakes are much higher with investing, because investing is a necessary activity to secure the financial future we want for ourselves and families. It’s staggering to me the amount of money investors pay advisers for activities that they really can do themselves for free. Investing might not be fun, but the typical investor will save tens of thousands of dollars with a low-cost, market-matching investment strategy and some may very well save hundreds of thousands over their lifetimes.
I can only surmise that many people don’t believe they can actually do it themselves. Yet each day, hourly-based advisors just like me design a plan in a few hours where companies like Vanguard and Fidelity will do all the transactions, recordkeeping and reporting for you at little or no cost.
This counterintuitive message isn’t always heard the first time and must be repeated before it truly registers. Just as The Piano Guy will undoubtedly keep inspiring would-be musicians through his broadcasts, I will continue to advise and instruct individuals on how to manage their own portfolios without a great deal of knowledge or effort. To hear reports of your successes by managing your own portfolios is truly music to my ears!