Why Investors Ignore Advice: The Struggles of a Financial Teacher

Understanding the Challenge of Providing Financial Guidance

I don’t offer financial advice for a fee, nor do I recommend specific stocks or funds to buy. However, as the chairperson of the Centre for Investment Education and Learning, when friends and family seek my help, it’s tough to turn them down. Over the years, I’ve learned a few lessons from these conversations.

The Urge for Immediate Action

First, the urge to take action usually dominates the discussion. I’ve yet to meet someone who wants to think deeply about how diversification benefits them. Instead, they want direct answers: buy this, hold that, sell that. It can be frustrating for someone like me, who values foundational principles over quick fixes.

Context Matters

Second, every personal finance question comes with its own context. For example, one relative may want to know if timing the market will improve his returns, but I can’t redirect the conversation to other important topics like selling underperforming investments or why keeping money in a savings account isn’t ideal. People care only about the questions on their minds at that moment.

The Influence of Social Circles

Third, everyone is influenced by their own set of advisors, which often isn’t rational. If a friend brags about a profitable stock, others may want to jump on board, wanting to feel included. They might blindly follow trends like day trading or buying properties just because others are doing it. My principles often can’t compete with these social influences.

Seeking Validation

Fourth, many people seek validation for their investment choices. They want their decisions to be praised and followed. It’s common for investors to quote famous figures like Warren Buffett, as they feel more secure when they align with recognized icons. This reliance on influencers often sidelines financial educators.

The Appeal of Quick Ideas

Fifth, we live in an age of quick, catchy ideas. Investors often latch onto short, memorable phrases instead of diving deep into financial concepts. When I told a relative about the importance of adjusting asset allocation, he dismissed it, saying he prefers to reinvest when the time is right. It’s disheartening to see how easily people hold onto these simplistic notions.

The Desire for Ownership of Success

Sixth, everyone wants to take credit for their successes. Once my relative achieves his financial goals, he will want to believe it was all due to his own efforts. It would be cruel for me to point out that I offered guidance. Mentors should be there to support and nudge, not to take center stage in someone else’s story.

The Challenge of Confirmation Bias

Seventh, despite my best efforts, investors often won’t follow my advice. Confirmation bias—the tendency to favor information that aligns with what we already believe—makes this challenging. If someone decides to invest more in falling stocks to average down, I find it hard to change their mind. They’ll stick to their views until they face the consequences.

The Privacy of Financial Struggles

Eighth, people often keep their financial struggles private. They make their own decisions, ignoring external advice, and typically only share their successes while blaming failures on external factors. This reluctance to seek comprehensive reviews leaves them dealing with emotions like guilt and regret in isolation.

A Focus on Core Principles

So, what should a financial educator like me do? I focus on core principles and aim to simplify complex ideas about personal finance. I don’t give specific action points or advice. My writing might resonate with someone who is grappling with similar issues, and if it sparks a moment of clarity for them, that’s a win.

That’s why I don’t write personal finance books with step-by-step guides or offer direct investment advice. Instead, I discuss common financial challenges people face, hoping to answer questions that may be swirling in someone’s mind. That’s motivation enough for me to keep writing.

(The Prespective Of Chairperson of the Centre for Investment Education and Learning.)