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Jason Zweig on Protecting your Wealth

February 23, 2010

by David Raileanu

Jason Zweig

Jason Zweig is the Investing and personal finance columnist for the Wall Street Journal.  He is also a guest columnist for Time magazine and previously wrote for Forbes and Money magazines.  His analysis has been featured on ABC, CNBC, CNN, and NPR.  He is the author of Intelligent Investor: A Book of Practical Counsel and of, Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich, which received widespread critical acclaim when it came out in 2007.  His most recent book is The Little Book of Safe Money: How to Conquer Killer Markets, Con Artists, and Yourself, which was published in November 2009 and is available from the link above.

We interviewed Zweig on January 24, 2010.

For financial advisors, what is the most important lesson when it comes to safe money?

If I had to boil it down to one message that probably isn’t in the book, it would be that advisors really need to be aware that they’re people too and they’re subject to the same flaws in thinking and the same emotional tendencies as their clients. There’s often a big temptation among people who are experts at what they do, as advisors certainly are, to conclude that they’re exempt from the behavior they control in other people.

If you check, you will find that most bookies don’t gamble. That’s not a universal tendency, however. At least until the past 10 or 20 years, it wasn’t that uncommon to come across oncologists who smoked. They spend all day telling people, “If you smoke, you’re going to die of lung cancer,” but to manage the stress, they step outside and have a cigarette.

I don’t want to make a broad sweeping statement that all advisors are reckless, undiversified, return-chasing, risk-seeking crazies who pay no attention to tax consequences – far from it. But there are general tendencies that really kill investors: things like overconfidence, careless or improper diversification, not paying enough attention to expenses, and having unrealistic expectations.  Advisors really need to make sure that, in the process of fixing those problems for clients, they don’t suffer from any of them themselves.