In a recent discussion with some financial planning colleagues, someone posed the question of what biases financial planners hold that influence their advice.

One person commented that they felt they hold an aversion to debt that biases their assessments of decisions to pay down debt versus invest (e.g., suppose you just inherited $100,000 and are deciding whether to pay off your mortgage or save it for retirement). Furthermore, they felt that this aversion makes them struggle to give the “right” advice to invest so long as the expected return on investment is greater than the interest rate on the mortgage.

However, I would propose that the tendency among advisors to conclude that investing is the “right” advice (and this is in fact what most advisors would suggest, particularly with mortgage rates near all-time lows) is itself a form of bias held among advisors — and even one that can easily lead people astray.

Specifically, it is a type of “street light effect,” referring to the tendency to “look for answers where the looking is good, rather than where the answers are likely to be hiding.”

Comparing interest rates and expected rates of return is the easy answer. Advisors can say, “Well, if we assume all else is equal, you’ll end up wealthier if you invest at 6% rather than pay down your mortgage at 3%.”

What this misses, however, is that all else is never equal in these cases. There are all sorts of more complicated downstream effects of this decision.

For instance, if you pay off your mortgage, you may be less inclined to stay in a job you hate purely for financial reasons; you may be better positioned to take advantage of entrepreneurial opportunities that arise; you may be less inclined to upgrade your house and push yourself further into debt; etc.

The financial and life implications of the considerations above are all meaningful and important. However, they are hard to compute. Unlike the interest rate vs. expected rate of return comparison, it is hard to quantify the value of being better positioned to seize some unknown future opportunity.

It is quite possible that eliminating debt is a wealth maximizing strategy, but it’s hard to show that with a calculator. So this is how we end up with a street light effect. Advisors tend to look for answers where the looking is good, even though that may mean missing more important considerations.

And in this particular case, I actually think the narrow, analytical approach used by many advisors may actually be the more harmful bias. Most people are averse to debt for good reason. That’s not to say that that aversion cannot be excessive, but the more life experience I gain, the more value I see — both financial and otherwise — in seeking to be debt-free.