Quarterly Letter Excerpt: Planners Corner

Happy New Year

The New Year is a good time to review your financial strategies to ensure they are aligned with your long-term goals – an expertise we bring to bear for our many client families. As the calendar turns and we look to the year ahead, what’s on your mind? What worries you? What excites you? Any hopes for the new year? As your wealth advisor, we endlessly ponder these questions. And while some items are more pleasant to contemplate, it can all feel daunting. We can’t know what the future will bring. But uncertainty is part of life, and each new year brings unexpected events that will impact who we are and how we think about the world.

Often, January is when we set goals for the coming year. But how when we can’t know exactly what’s ahead? Early 2020 threw us a global pandemic; 2021, a new US president; 2022 began with a Russian invasion of Ukraine: and in 2023 we jumped headlong into an artificial intelligence craze. Some developments are more consequential than others, but each brings unique
haziness. What might 2024 hold?

The good news is we don’t actually need to know, though we must be ready for anything. It’s in our nature to believe we can think on our feet and quickly adapt to a changing environment. Unfortunately, that’s easier said than done. For instance, consider a soccer player receiving the ball without having analyzed the whole field. Focusing solely on the ball forces them to react without proper scope. Should they pass, shoot, or perhaps execute a Maradona turn? Whatever the decision, they must act. Despite ardently training for this moment, full preparedness is lacking because they’ve neglected their surroundings. As it turns out, context and the bigger picture matters.

Just as situational awareness is necessary for athletic success, it also greatly impacts financial outcomes. Indeed, if you aren’t keenly aware of the backdrop (including self-awareness which takes into account our own behavior and biases) your abilities alone may not be enough when the “financial ball” is passed and critical decisions need to be made. As you’ve likely heard us say, we believe in the importance of quality advising where
financial success is the compounding result of a series of good decisions over time.

In soccer, it’s easy to know who wins – just look at who scored the most goals. Financial plans are different. What does it mean for you to win the “money game” you’re playing? Standard replies often center around the notion of financial independence, retirement, or a specific net worth. In fact, you could probably tell us precisely how much you’d like to make this year and what you’d like out of your investment portfolio(s), real estate, etc. Yet, viewing your finances in this way implies that money is a finite game with clear “winners” and “losers” bound by defined rules, limited resources, shared objectives, with cookie cutter endpoints and benchmarks. In truth, money and personal finance is an infinite game with no set finish line or buzzer. We must create individualized rules to offer our money utility. This personalization gives wealth purpose as we define both our goals and values. From there, we keep proactively “playing the game” based on this custom framework dedicated to your specific situation.

Bestselling finance author Morgan Housel has said the following about investing (one of the many areas of financial planning):

“It’s so easy to lump everyone into a category called
‘investors’ and view them as playing on the same field
called ‘markets’. But most of the time you’re just a
marathon runner yelling at a powerlifter. So much of what
we consider investing debates and disagreements are just
people playing different games and unintentionally
talking over each other. A big problem in investing is that
we treat it like it’s math where 2+2=4 for me and you and
everyone – there’s one right answer. But it’s something
closer to sports, where equally smart and talented people
do things completely differently depending on what game
they’re playing.”

Perhaps the single best game to impart the complexities of financial planning is three-dimensional chess with multiple opponents. Every move, every choice, creates additional uncertainties and interdependence that didn’t exist prior. And every move made by an opponent (e.g., externalities) creates the opportunity to reexamine one’s strategy. Financial plans can be continuously adjusted as each piece moves in the multi-dimensional chess game of life. Establishing an always monitored, ever evolving financial plan where we work together increases the odds of successful financial outcomes.

A central purpose of a financial plan is to help weather economic storms so that no matter what stage of life – accumulation, preservation, or distribution – you’re capable of absorbing and adapting to shifting environments. Let’s briefly revisit the notion of event-driven uncertainty. Think about the most recent significant global, national, or even local event. Did any of those catch you off guard, feeling unsure of your surroundings? Were you concerned about potential financial impacts? Going back to our soccer analogy, now imagine how would it feel to receive that “pass” amid the deafening stadium chaos, but this time you know exactly where you’re going. You’re prepared, situationally aware, and have filtered out the noise. Your coach’s (advisor’s) voice, the person with the best view of the entire playing field, comes through with great clarity and together optimal decisions are made.

Such arrangements bestow enhanced confidence to continue with the plan. When most are fearful, finding the signal in the noise provides us the refreshing opportunity to concentrate on other areas of life that truly bring joy and fulfillment. As your trusted wealth advisor, that’s the role we play. We’ll be here for you this year and beyond. Happy 2024!