Common wisdom (isn’t that a vague phrase?) often tells us to obtain a second opinion when we are not certain about a particular course of action. We see that a lot in relation to recommendations for surgery and other medical procedures, in some legal matters, and on insurance offerings. So maybe that could be a good idea for some of us when it comes to investment advice. Might not a second opinion shed some light on the strengths and weaknesses of the first?
One of the reasons for seeking a second opinion has always been for confirmation that the original suggestion was reasonable under the circumstances. After all, we don’t want to go down a possibly risky path without it being likely that it will be worthwhile to take that risk when balancing it with the alternatives. And because reasonable minds can differ (they really can) getting another informed view can be helpful to us in making a decision.
Returning to our subject of investments, your adviser, no matter who it is, will have their opinions about what is the best course for you in choosing investments. Those opinions may be based on many years of experience, on persistent research and analysis, on a hot tip, on the amount of commission expected, on the throwing of darts – in fact, those opinions may be based on almost anything. This is not to say that YOUR adviser is doing anything improper or failing to do something he or she should do. Instead, it is just to say that there are many factors influencing an investment recommendation and we do not always know all of them or how they work together.
Hence the logical desire for a second opinion. It is always interesting to compare recommendations and to ask the adviser the whys and wherefores of such recommendations. You do not have to accept either recommendation and should know that the second opinion is not entitled to any more deference than the first. The point is to get a sense of the validity of the process and approach used by each adviser with the goal in mind of making sure YOU are being served.
A final note: a good adviser will welcome the fact that you are seeking a second opinion. It will confirm that recommendations matter, that you are engaged in the process, that the recommendations are being tested to some extent. The good adviser can see this as a valuable learning experience and tool for the adviser in future dealings.