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Caution

From Whom Should You Take Advice?

CautionYou’ll hear this at parties, in coffee shops and pretty much anywhere that people hook up to chat. Someone talks about a problem, mentions their conundrum and then someone else chimes in with something like this: “You know what you should do?” Or, “If I were you I would….”

Everyone has advice for you.

Turn on the TV and you get more of the same thing – “experts” being interviewed left, right and centre. Have you noticed that there are rarely interviews with “experienced” people, just experts?

So here is my question: Who is considered an expert? And to whom should we listen when we have a problem or when we simply want more information on a given topic, whether it’s our love life, investment strategy, career or even just a holiday destination?

When I was working in my previous field, I’d see websites popping up all the time that made pretty interesting claims. There were a lot of “Rent to Own Experts” and “The Leading Rent to Own company in X City”. This cracked me No 1up. I’d been working exclusively in Rent to Own in the Ottawa market for more than six years and suddenly there were websites from companies I’d never heard of, with no names of actual people referenced on the site, who claimed to be the leading experts in this town. Interesting.

I’ve also seen people dispensing advice from the stage, supposedly as experts in the field, and from what I can tell they have limited experience. The same goes for books.

Not to stir up a hornet’s nest, but isn’t this akin to priests dispensing marriage advice? (Sorry Mom, I know you like your parish priest, but still….)

When I first entertained the idea of investing in real estate as my primary focus, there was no shortage of naysayers. Family members pointed out just how many people had lost their shirts in real estate; colleagues who barely knew me felt it was important to warn me that “in this market” it was folly; friends shook their heads and told me they’d never dream of taking that kind of risk; and strangers at parties told me about their uncle’s wife’s friend who had had a horrible tenant and it cost her a small fortune.

These people had two things in common. First, they all meant well. Their warnings came from a place of genuine concern for me and my financial well-being.

Second, not one of them owned investment real estate. They had no experience and yet they were dispensing advice.

Despite the dire warnings, I have done well in real estate and I continue to grow my portfolio. It hasn’t all been giggles and roses – some properties/tenants have been a real challenge – but I am thriving because I took the time to become educated before I started to buy and I continue to turn to people who know what they’re doing for guidance.

Think about your own life and particularly those moments where you were considering making a change or you faced some challenges. Were the people who gave you advice really qualified to do so?

This matters. If we take advice from people who do not have the experience to back up their recommendations, then it is a case of the blind following the blind and we may not be making the best choices for ourselves, regardless of the advice-giver’s good intentions.

Advice worth listening to

Don Campbell, an experienced investor and bestselling author, wrote this in the forward to Thomas Beyer’s book on real estate investing entitled 80 Lessons Learned On The Road From $80,000 to $80,000,000:

There is a hard and fast rule in life, business and personal relationships, a rule that governs my choices…. I call this rule “The Final 30 Feet Rule.” The Final 30 Feet Rule states: Never take advice from someone who has not already successfully accomplished what you want to be successful at. For a comedian, it means do not listen to anyone who hasn’t walked that final 30 feet from behind the curtain to standing alone in front of an audience. For investors or business owners, it means the only people worth listening to are those who have created business or investing success that far surpasses yours.

For investors in the stock market, I would add the following criteria: Listen only to people who are qualified (i.e. not just salespeople in the guise of advisors), who are willing to commit, in writing, to working in your best interests (i.e. a fiduciary), and who have grown the kind of portfolio you aspire to (i.e. have walked the talk).

Here are a few questions to ask when you’re trying to figure out if someone is really an expert:

  • What makes them an expert?
  • What experience do they have?
  • What have they accomplished in the area in question?
  • How long have they been at it?
  • Have they walked “the final 30 feet”?
  • Has their success far surpassed your own?

Whether you’re looking for business advice, thoughts on how to deal with an annoying co-worker or guidance on how not to attract another deadbeat boyfriend, be critical of the source of the advice coming your way.

And for heaven’s sake, beware of experts.

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