$ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ Intentional Investing Newsletter October, 2004 $ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ IN THIS ISSUE: 1. Note from Your Editor, Lynne 2. Article: Choice, Money and Happiness -- Overchoice and the Tyranny of Small Decisions 3. Resource Spotlight: Choosing the Right Financial Advisor 4. 4Love+Money - Ask the Coaches 5. Intentional Investing Announcements ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Note from Lynne -=- Dear Reader, We had a fabulous response to the new series on Money and Choice. This topic seems to hit a cord with many of you. Have you had to make a major decision lately -- change your telephone service plan, buy a computer, decide among health insurance policies or invest your retirement fund? On a more mundane level, have you bought a can of soup, salad dressing or toothpaste? Last week I was confronted with 60+ salad dressing choices, laid out in all their brilliance over three long shelves in my supersized grocery store. And that was only one item on my 30-item shopping list! Do you feel happy about all these choices? Does it feel fun? If you're like me, it feels more burdensome than anything. I think most of us appreciate the importance of choice in our lives, particularly when we compare ourselves to people living in countries where that freedom is not a given. But there's a darker side to the freedom of choice. It's been dubbed the "tyranny of small decisions" by economist Fred Hirsch. Are you experiencing the tyranny of small decisions? Then our feature article on the topic of overchoice is a must-read. And, attend our FREE teleclass "Overcome Overchoice" on October 19. See the Intentional Investing Announcements for information. Speaking of choices, see our Resource Spotlight on "Choosing the Right Financial Advisor." Intentional Investing spotlights financial advisor Stacy Feiner with Merrill Lynch. And, join Stacy and me for a free teleclass on the topic, scheduled for late October. If the topics of choice and money resonate with your experience, let me know. And, do pass this newsletter on to friends who might benefit as well. Warm regards, Lynne ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ Lynne Hornyak, Ph.D., Editor e-mail: Lynne@LMHServices.com Coaching successful professionals to greater financial freedom and well-being. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Feature Article: Choice, Money, and Happiness Part 2, Overchoice and the Tyranny of Small Decisions -=- Self-determinism is part of the American way of life. We prize our freedom to choose, and rally against what would limit us in making our own choices. In his fascinating book, The Paradox of Choice, Barry Schwartz makes the point that our society is actually suffering from the darker side of freedom -- overchoice. Just think about your workday so far. How many small decisions have you already made? * What outfit should I wear today - which clients am I seeing, what's clean, what doesn't need to be pressed? * Do I want an espresso, latte or cappuccino to get my caffeine fix this morning? * Whose phone call do I return first? * Who can I delegate these tasks to? We are making decisions every day on a minute-to- minute basis. And as Schwartz points out, it's not just about work. In our society we choose how to work, love, and pray; we choose groceries, utilities, health care and retirement plans; we can choose our personal identities as well as our version of beauty through plastic surgery. So many choices, so little time. Extracting from current research on consumerism and choice, What do we now know about overchoice? Here are three key points that have relevance to our choices about money matters. 1. It's the cumulative effect of constant choices that causes distress. If it came to being able to choose or not, most of us wouldn't think twice. We'd opt to make choices. And, some of us get "charged" by making all the small and large decisions that confront us daily. Yet there comes a point when so many choices take up so much of our time and energy that most people long to get away from the constant demand. That constancy is stressful, and takes its toll on happiness and physical well-being. And as economist Fred Hirsch coined it, we can get trapped in the "tyranny of small decisions." For example, numerous options for investing our money is generally viewed as a good thing. Yet how many of us feel stressed deciding the "best" investment vehicles for our retirement accounts? Over and above choosing investment products, we are faced with decisions ranging from what to read, which market indices to track, how to choose a financial advisor through when and what to buy or sell. The sense of responsibility for failure can feel quite weighty. 2. Overchoice can lead to indecision. Social psychologist Sheena Iyengar (reported in DeAngelis, 2004) has conducted some interesting studies that demonstrate that too many choices can lead to not choosing at all. In one study, people sampled jams in a gourmet food store. Some customers had 24 choices available, others had six. If they bought a jar, the customer would receive a coupon for a dollar off the price. It turns out that, while more customers were attracted to the larger array, only 3% bought a jar, compared to 30% who made a purchase when only six types were available. To determine if the importance of the task made a difference in decision making, Iyengar and a colleague conducted a similar study with retirement fund packages. They analyzed the choices of 800,000 employees at 647 companies. Employees were offered packages with anywhere from two to 59 choices in them. The findings were the same as for the jam study. With more options, fewer individuals participated in 401(k) plans - 60% participated when given 59 options, while 75% participated with given two options. In addition, people were MORE cautious with their investment strategies as the number of options increased. Think back over your recent savings or investment decisions. New products are constantly being developed to tap emerging markets and different consumer needs. Yet, how many times have you said to yourself: "I really should look at my portfolio, or check into this product, or read more -- and your money sits where it always has, in your bank account? Or, you spend it so there's no decision to be made? 3. Overchoice can lead to snap judgments or nonintentional action. When faced with multiple choices, some individuals don't avoid. They make a quick decision to put an end to the discomfort of the process. Social psychologist Alexander Chernev (reported in DeAngelis, 2004) has studied this angle on overchoice. Chernev found that when people were offered an array of toothpaste options (e.g., whitening, tartar-control, cavity-preventing, etc.) from the same brand, they switched to a brand with a single option. Chernev explains that if a customer has no idea how to decide, they may switch to another brand that doesn't require them to make tradeoffs. Again, quick decisions aren't good or bad. It depends on your analysis - or lack of analysis. Did you make that decision based on understanding your options or knowing your preferences? Or did you make a snap decision because you didn't really have a clue how to be thoughtful about the choices? This can easily apply to money matters. For example, did you make that quick decision to buy Brand A computer because looking at all the models and features was giving you a migraine? Or because the salesperson said she uses Brand A? Or did you carefully compare brands or models on their features based on your computing needs? So what advice can we distill from the research on overchoice for managing your money in effective, satisfying ways? 1. Clear preferences help to reduce the stress of overchoice. Chernev's research shows that when people enter a situation, such as purchasing an item, with clarity about what they like and prefer, they were better able to sift through or screen out excessive choice. 2. Set appropriate limits on the amount of searching you do. Decide what will be "good enough" rather than attempting to cover every base. For example, decide that you'll visit the top three stores on your list, rather than every store possible. Decide that you'll spend a certain amount of time looking then make a decision, rather than leave time open-ended. (Granted, if you're not convinced you've found what you really want, that might be a reason to delay your decision!) We'll discuss the concept of "good enough" in more detail in our future issue on "maximizing vs satisficing." 3. Be aware of the urge to shortcut your decision-making process beause you're feeling overwhelmed. This may be a time to use tip 4. 4. Gather knowledgable resources around you. Resources might be articles on a type of investment you are considering or consumer reports on a product you're buying that can help you evaluate features. Resources also include financially knowledgable family, friends as well as financial advisors who can help you sort through the information and make thoughtful decisions. Read the Spotlight section for tips on choosing financial advisors, provided by Stacy Feiner of Merrill Lynch. 5. Take a series of small steps. If it's a big decision, such as selecting your 401(k) options, reshaping your portfolio or making a large purchase, break the task into small, manageable steps that will give you the information, comfort and confidence you need to make decisions that affect your financial health and your happiness. Reference DeAngelis, Tori. Consumerism and Its Discontents. APA Monitor on Psychology, June, 2004. Schwartz, Barry. The Paradox of Choice: Why More is Less. New York: HarperCollins. 2004. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ Like what you're reading? Then send this newsletter to friends, family, and colleagues who are interested in moving toward greater financial freedom and well-being. They can subscribe at www.lmhservices.com, or by sending an e-mail to Lynne@WLMHServices with "subscribe newsletter" in the subject line. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Resource Spotlight: Choosing The Right Financial Advisor -=- Excerpts from “Choosing the Right Financial Advisor.” Do you earn an income, or have inherited wealth? Then you most likely need financial advice according to Stacy Feiner, Financial Advisor with Merrill Lynch. Dr. Feiner observes “Individuals at all income levels have a tendency to put loads of energy into earning income. However far less energy is given to managing the money once it is earned….Needless to say people earning income need advice about managing it.” -=$=- To obtain a complete copy of Dr. Feiner’s excellent article, Choosing the Right Financial Advisor, contact her at Stacy_Feiner@ml.com. -=$=- Already have a financial advisor? If you’re satisfied with the relationship and results, fine. If not, now is the time to self-advocate. If you think the relationship is salvageable, meet with your current advisor to make improvements. If you ultimately decide to seek a new advisor, don’t be afraid to terminate the current relationship in order to commence a new advisory relationship. It is appropriate and conscientious to work with professionals whom you like and respect, and who you feel are committed to helping you meet your goals. What Questions Should You Ask? Dr. Feiner recommends finding out everything you can about their qualifications: education, experience, number of clients, professional memberships and specialties. She emphasizes, however, that the answers you get are not as important as the tone and manner in which the advisor responds. If the advisor receives your questions with openness and non-defensiveness, that’s what you’re looking for. She offers several additional questions: * What is your general approach? Look for answers that involve your whole financial picture, rather than specific products. * Will you be the only person I work with? Find out if the advisor works in a partnership with other advisors. Or do you call into a call center and get connected to the next available agent? * How are you compensated? What are your fees? The basic methods of compensation are “transactional” and “wrap fee”. Transactional means that each trade or change in your portfolio has a fee. Wrap fee means that you are charged a fixed fee that could be a set dollar amount, or a percentage of your portfolio. * Have you ever faced disciplinary action as a financial professional? * Can you give me some references? You want the advisor to respond with some mention of confidentiality as it relates to your request. However there may be a few clients who have agreed to be called or mentioned. Or, ask to speak with the advisor’s manager as a reference. The Choice to Act Interesting information? If you’re like many readers, you’ll find it useful, but take no action. The most common reason for lack of action? “I’m too busy”...which is not untrue. But think about it. Your financial planning sets the course for financial well-being.... from generation to generation. So, take that important step. Pick up the phone, get a referral and make an appointment. Be a great leader for your family and generations to come. Author: Stacy Feiner is a partner on a Financial Advisory team at Merrill Lynch. Dr. Feiner and her partners advise clients on every financial issue involving individual wealth and business finance and lending with a disciplined and client-centered focus. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ NEW ANNOUNCEMENT! 4Love+Money - Ask the Coaches with Romance Coach, Kathryn Lord We're pleased to announce that, beginning this month, Intentional Investing returns to the popular topic of "joining hearts and wallets." Many of you may remember Romance Coach Kathryn Lord's great wit and insights. 4Love+Money will have its own monthly issue, highlighting questions from our readers. Kathryn and I respond from our respective positions as experts on romance and money, and their entanglements. The first question is "When Should We Talk about Money?" Look for "4Love+Money - Ask the Coaches" in your email box next week! Invitation: Submit YOUR questions on love and money to Lynne@LMHServices.com. You don't need to be in a new romance - all questions are welcome! If you'd like to contact Kathryn directly, her email is Kathryn@Find-A-Sweetheart.com; website: www.Find-A-Sweetheart.com. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ If you are interested in coaching, contact me for a free half-hour consultation at Lynne@LMHServices.com. or (202) 387-5923. Please include your name, e-mail address, phone number and brief description of your interest in being coached. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Intentional Investing Announcements -=- $ Free October Teleclasses $ TO REGISTER: Send an email to Lynne@LMHServices.com with "Register " in the subject line. In the body of the e-mail, please include your name and email address where you'd like to receive the teleclass phone number and information. OVERCOME OVERCHOICE! Tuesday, October 19 7:00 – 8:00 pm Eastern Facilitator: Lynne Hornyak, Intentional Investing Weren’t we told that choices are empowering? How many choices do you make in a day, from the mundane – buying your morning coffee – to the critical – deciding how to allocate your $500K budget? And how many of these decisions come with multiple options? Are we exhausted yet?? Burdened by the “tyranny of small decisions”? Then the one choice you absolutely need to make is to attend this teleclass! Learn ways to take the stress out of choice. Register by October 18. CHOOSE THE RIGHT FINANCIAL ADVISOR Date Time Guest: Stacy Feiner, Financial Advisor with Merrill Lynch Here's your opportunity to chat with our guest, a seasoned financial advisor. Come with your questions about finding, choosing or replacing a financial advisor. Be encouraged to search for that right match, a financial advisor who will work best with and for you! About our guest: Stacy Feiner is a partner on a Financial Advisory team at Merrill Lynch. She has woven together diverse professional experiences into a unique brand of Financial Advisor. With a doctorate in clinical psychology, Dr. Feiner has worked as a psychotherapist, college instructor, business consultant, strategic coach, and public speaker. Additionally, Stacy and her husband are busy raising two children. Register by October... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 4Love+Money – “Talk to the Coaches” Series WHEN DO WE TALK ABOUT MONEY?? Thursday, October 21 8:00 – 9:00 pm Eastern Facilitators: Lynne Hornyak, Intentional Investing and Kathryn Lord, Find-a-Sweetheart.com You’re starting a new relationship. Sooner or later you have to talk about money -- yours and your sweetheart's. If you are embarrassed, terrified, or haven't a clue about where to start this critical discussion, join us for a free-wheeling Q and A about dollars and cents. Register by October 20 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Have you been to the Intentional Investing webpage lately? Go to www.lmhservices.com and click on "Changing your Relationship to Money." On the Intentional Investing webpage, you can take a self-quiz on Your Relationship to Money, participate in a survey on gender and money, access articles written by Lynne as well read previous editions of this newsletter! ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ PLEASE NOTE: Intentional Investing [TM] is intended for informational and educational purposes only. It is not a substitute for financial, legal, accounting, psychotherapeutic, or other professional advice and consultation. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ Copyright 2000-2003 Lynne Hornyak. All rights reserved. The above material is copyrighted but you may retransmit or distribute it to whomever you wish as long as not a single word is changed, added or deleted, including the contact information. However, you may not copy it to a website without my permission. Reprint permission will be freely granted upon request. Advance written permission must be obtained for any reprinting of this material in modified or altered form. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ $=$ CONTACT INFORMATION $=$ Lynne Hornyak, Ph.D. LMH Services Coaching and Consulting 3818 Klingle Place, NW Washington, DC 20016 Phone: (202) 387-5923 Fax: (202) 244-3373 e-mail: Lynne@LMHServices.com Web: www.LMHServices.com ================================== Please be advised that confidentiality of email transmissions can not be guaranteed. ================================== Lynne Hornyak, Ph.D., PCC LMH Services Coaching and Consulting lynne@lmhservices.com (202) 387-5923