A Higher Level of Thinking and Advice: Let's Talk About Biases

One of the most common questions consumers are encouraged to ask financial advisors is:

"Are you a fiduciary?"

It is not a bad question.

But it is not enough.

In recent years, the word fiduciary has become one of the most powerful marketing terms in financial services. Consumers are often led to believe that if an advisor claims fiduciary status, they are somehow free from conflicts, preferences, philosophies, or personal biases.

That simply is not true.

In my opinion, there is a higher level of thinking consumers should understand when evaluating advice.

Let's talk about biases.

Everyone Has Biases

The word "bias" often carries a negative connotation. We tend to associate it with prejudice, dishonesty, or unfairness.

However, many biases are simply the result of experience.

• An estate planning attorney who has spent thirty years helping families through probate will naturally place a high value on trusts and legal planning.

  
  

• A CPA who has watched clients lose significant wealth to taxes will naturally focus on tax efficiency.

  
  

• An investment advisor who has spent decades building portfolios will naturally emphasize investments.

  
  

• An insurance professional who has witnessed life insurance preserve businesses, create liquidity, protect families, and solve planning problems will naturally recognize situations where insurance may be valuable.

None of these perspectives are inherently wrong.

In fact, they may be based on years of real-world observations.

The issue is not whether an advisor has biases.

The issue is whether they recognize them.

My Own Biases

When clients ask me questions, there are times when I openly tell them:

"I have a bias here, and I want you to understand where it comes from."

Why?

Because I want them to understand that my perspective has been shaped by experience.

For example, I believe life insurance is one of the most misunderstood financial tools available today.

That belief did not come from reading a sales brochure. It came from seeing life insurance save businesses from forced liquidation, provide liquidity where none existed, fund buy-sell agreements, equalize inheritances, protect families, and solve planning problems that other financial products simply could not solve.

Does that mean life insurance is always the answer?

Of course not.

But it does mean I am likely to recognize situations where it deserves consideration.

Rather than pretending I have no bias, I prefer to disclose it.

Then the client can evaluate my advice with full transparency.

Biases Leave Clues

One of the things I have learned over the years is that biases are often predictable.

Not because people are dishonest.

Because people tend to gravitate toward philosophies, organizations, licenses, designations, and business models that reinforce what they already believe.

When I meet a financial professional, I often begin forming impressions about their likely worldview long before they make a recommendation.

• Their licenses tell me what tools they can use.

  
  

• Their designations tell me what educational frameworks influenced them.

  
  

• Their professional memberships tell me which communities they associate with.

  
  

• Their marketing tells me how they view the world.

  
  

• Their recommendations tell me what they trust.

None of these things are inherently good or bad.

They simply provide clues.

For example, when I hear someone prominently market themselves as a "fee-only fiduciary," I can often make some educated guesses about how they approach planning.

Based on my own observations, many fee-only advisors tend to be skeptical of insurance-based solutions beyond basic protection needs. That may be because their training emphasizes investment management. It may be because they have no economic incentive to learn about commission-based products. It may be because their professional communities reinforce those beliefs.

That does not make them wrong.

It simply means they may be viewing the world through a particular lens.

Likewise, when I meet an insurance-focused advisor, I often have assumptions about the recommendations they may favor.

Sometimes those assumptions are correct.

Sometimes they are not.

That is why I view these observations as indicators rather than conclusions.

Marketing Reveals More Than People Realize

One of the easiest places to spot bias is in marketing.

For example, I often see advisors promote concepts such as:

• "The wealthy do this."

  
  

• "Rich people use this strategy."

  
  

• "Billionaires buy this product."

Perhaps.

But I have learned to be cautious when I hear those statements.

In many cases, the person making the claim is not actually working with the ultra-wealthy. They may simply be repeating what they have heard from others.

Personally, I prefer to focus on the planning problem itself rather than attempting to borrow credibility from what wealthy people supposedly do.

The fact that a billionaire may use a strategy does not automatically make it appropriate for a retiree, a small business owner, or a middle-income family.

Good planning should be based on objectives, not prestige.

Designations Influence Thinking Too

Designations are valuable.

They provide education, technical knowledge, and professional standards.

However, designations also expose people to particular schools of thought.

• Some designations emphasize investment management.

  
  

• Others emphasize insurance planning.

  
  

• Others focus on taxation, retirement planning, estate planning, or financial planning processes.

Over time, those educational influences shape how professionals approach client situations.

Again, this is not a criticism.

It is simply reality.

Education influences perspective.

Perspective influences recommendations.

Recommendations influence outcomes.

The Danger of All-or-Nothing Advice

One of the ways bias can become dangerous is when it evolves into all-or-nothing thinking.

I have seen this happen on both sides of the financial services industry.

Some advisors appear to believe every problem can be solved with investments.

Others appear to believe every problem can be solved with insurance.

Neither position is likely to be true.

In my experience, most financial tools have strengths, weaknesses, costs, benefits, and limitations.

The real question is not whether a strategy works.

The real question is how much of it belongs in a person's overall financial life.

For example, I am generally favorable toward life insurance when it is properly designed and used for an appropriate purpose.

That is one of my biases, and I openly acknowledge it.

However, acknowledging a bias does not mean abandoning common sense.

• Not every person should maximize life insurance.

  
  

• Not every person should maximize investments.

  
  

• Not every person should maximize any single strategy.

Good planning is rarely about choosing one thing.

It is usually about determining the appropriate balance among many things.

Just as important, a strategy should make sense not only mathematically but psychologically.

A recommendation may look wonderful on paper, but if the client does not understand it, does not believe in it, or cannot comfortably implement it, it may not be the right recommendation.

Financial planning is not performed for spreadsheets.

It is performed for people.

The best recommendations are not merely mathematically sound.

They are understandable, sustainable, and appropriate.

Marketing Possibilities Is Not the Same as Recommending Them

I enjoy marketing.

I enjoy teaching.

I enjoy challenging assumptions.

Most of all, I enjoy showing people what is possible.

Some people find that surprising because they assume marketing and recommendations are the same thing.

They are not.

Marketing attracts attention.

Advice requires judgment.

For example, one of my favorite concepts to discuss is the fact that under the tax code, it is possible for some retirees to receive retirement cash flow from tax-exempt sources and potentially have little or no taxable income.

I love talking about that.

Not because I believe every client should pursue that outcome.

Not because I believe every client can achieve that outcome.

But because it demonstrates what is possible under the rules that already exist.

One of the tools that may contribute to that outcome, depending on the circumstances, is properly structured life insurance.

• That does not mean life insurance is always the answer.

• It does not mean every person should own it.

• It does not mean every person can fund it appropriately.

What it does mean is that consumers deserve to understand how the rules work and what opportunities may exist.

The same principle applies to many financial concepts I discuss.

• I enjoy showing people what is possible.
  

• I enjoy showing them how the tax code works.

  
  

• I enjoy showing them how insurance companies evaluate risk.

  
  

• I enjoy showing them how retirement income can be created from different sources.

  
  

• I enjoy showing them how business owners, families, and retirees may have options they never knew existed.

Why?

Because people cannot choose from options they do not know about.

Once those possibilities are understood, a completely different conversation begins.

Now we can ask:

• Does it make sense?

  
  

• Is it affordable?

  
  

• Is it sustainable?

  
  

• Does it fit the client's goals?

  
  

• Does it fit the client's values?

  
  

• Does it fit the client's temperament?

Sometimes the answer is yes.

Sometimes the answer is no.

Sometimes only a small portion of the idea belongs in the overall plan.

That is where advocacy begins.

My responsibility is not merely to show what is possible.

My responsibility is to help determine what is appropriate.

For example, many people are surprised to learn that a healthy 30-year-old parent earning $100,000 per year may qualify for up to $3 million dollars of life insurance coverage (30x).

Why?

• Why would an insurance company allow that?

  
  

• What assumptions are they making?

  
  

• How does human life value factor into the calculation?

  
  

• How is the financial loss being measured?

Those are fascinating discussions because they help people understand the logic behind the numbers.

Too often, financial conversations begin with limitations.

• "What can you afford?"

  
  

• "Here's what you qualify for."

  
  

• "Here's what I think you should do."

There is certainly a place for those conversations.

But I prefer to begin with possibility.

• Here is what can be done.

• Here is why it can be done.

• Here is how the rules work.

• Here is what the mathematics say.

Then we can determine whether any of it makes sense.

• Sometimes the answer is yes.

  
  

• Sometimes the answer is no.

  
  

• Sometimes the answer is partially.

  
  

• Sometimes the answer is not now.

That is where planning begins.

I believe consumers have a fundamental right to understand what is possible before deciding what is appropriate.

Once they understand the possibilities, the conversation changes.

We are no longer discussing theory.

We are discussing their life.

• Their goals.

• Their finances.

• Their values.

• Their temperament.

• Their priorities.

A strategy that is technically possible is not automatically appropriate.

A strategy that works mathematically is not automatically suitable.

That is why I view my role as having two separate responsibilities.

First, educate.

Second, advocate.

Education expands awareness.

Advocacy applies judgment.

One shows what is possible.

The other determines what is appropriate.

The best planning occurs when both are present.

Biases Are Not the Problem

The real problem is unacknowledged bias.

A fee-only advisor who openly says:

"I generally prefer investment-based solutions and may be skeptical of insurance-based solutions."

is being transparent.

An insurance professional who says:

"I have seen life insurance solve many planning problems, so I naturally look for situations where it may fit."

is also being transparent.

Both disclosures help the client.

Neither disclosure guarantees the advice is right or wrong.

The danger comes when professionals become so committed to their worldview that they stop recognizing it as a worldview.

That is when objectivity begins to suffer.

A Better Question

Instead of asking only:

"Are you a fiduciary?"

Consumers may benefit from asking additional questions:

• What problems do you specialize in solving?

  
  

• What tools are you willing to use?

  
  

• What tools do you generally avoid?

  
  

• How are you compensated?

  
  

• What experiences have shaped your views?

  
  

• What professional communities influence your thinking?

  
  

• What biases should I know about?

Those questions often reveal far more than a title, designation, or marketing slogan.

A Higher Standard of Advice

I believe clients deserve more than compensation disclosures.

I believe they deserve bias disclosures.

Not because biases are bad.

Because they are real.

Every advisor has a framework through which they view the world.

Every advisor has experiences that influence recommendations.

Every advisor has strengths, weaknesses, preferences, and blind spots.

The most trustworthy professionals are not those who claim to be completely objective.

They are the ones who are self-aware enough to recognize their biases, transparent enough to disclose them, and humble enough to admit that no single professional has all the answers.

The danger is not bias itself.

The danger is when professionals become so committed to their worldview that they stop recognizing it as a worldview.

That, in my view, represents a higher level of thinking and advice.

And ultimately, that is what clients deserve.