Coming soon to a commercial break near you, is a new advertising campaign from the CFP Board that aims to shed light on the higher emotional well-being consumers achieve when engaging with a certified financial planner. You may have seen their previous T.V. spot from a couple of years ago which featured a professional DJ throwing on a suit and convincing prospective clients that he was a trustworthy financial advisor.
That campaign slogan was “if they’re not a CFP pro, you just don’t know.” It was a clever public service announcement pointing to something we’ve written about here before - the importance of understanding where your financial advice is coming from, and whether or not it’s in your best interest.
The latest promotion pivots from pointing out the danger of working with just any “advisor,” to showcasing the potential benefits of engaging in financial planning work. Yet, what seems to get glossed over in all of the excitement to spread the word, as often happens when advisors attempt to describe their services, is a good explanation of what exactly financial planning is in the first place.
As a financial advisor, most of my career has been focused on strategies to help individuals save, invest and protect their money. The point of accumulating wealth is primarily to assist clients’ in reaching their aspirations, hopes and dreams. With so much time centered on growing wealth, little was dedicated to the other side of the equation – spending it. However, what is the point of working so hard to have “enough” if we don't use it to spend in ways that make us happy? A few years ago, I came across the book Happy Money: The Science of Smarter Spending. The authors are two behavioral science professors who suggest there may be opportunities to derive greater happiness by changing the ways we spend our money. More money doesn't always lead to more happiness. However, how you choose to spend can have an impact. They outline five key principals which can result in money actually buying happiness.
The highly unlikely 2017 and the more typical 2018 that has followed has me contemplating the difficulty of forecasting how the market will do in the future. I don’t remember anyone anticipating, in December 2016, a banner year in 2017 via a nice straight line. Indeed, predicting any given future year’s stock market performance is very difficult, but why don’t you try!
When Greg Brandt’s father decided the time had come to replace his aging navy blue Buick Park Avenue, the 87 year-old did what any conscientious consumer would do; he scheduled a visit to the local auto mall in Lansing, MI and test drove vehicles that seemed like suitable candidates to meet his budget and transportation needs (1). At each of the dealerships the young salesmen were polite and quite eager to demonstrate the superior qualities unique to their particular brand and model. By the time Greg’s father returned home later that evening, the octogenarian proudly announced he had made a down payment and executed a purchase agreement to trade in the old Buick and take delivery of a new vehicle from the factory manufactured to his specifications. By all accounts, it seemed like a successful outing.
The problems arose several weeks later when it became evident the retired professor had placed factory orders for 3 separate vehicles with 3 different dealers…and made substantial down payments for each. While the auto dealers demonstrated remarkable understanding in helping to unwind the mess, it wasn’t entirely a painless process for anyone.
For most of us, knowing exactly when it might be time to step in and assist an aging parent manage their financial affairs isn’t always quite so obvious. It can be equally as challenging for the person requiring assistance to know when it's the right time to ask for help. Nobody really likes to think about the onset of diminished financial capacity (either for ourselves or for those we are closest to). However, simply ignoring red flags can not only extract a financial toll on a retirement nest egg, it also can impose an emotional toll on family members and loved ones.
Technology has made incredible strides in the last 25 years, and it will only continue to improve as the digital age advances. The launch of the Internet changed the way we function in society. It has allowed us to stay connected, informed, and involved with just one click. The internet has also provided effortless ways to shop, travel, and manage finances. However, with increased benefits and conveniences comes increased risks. The Internet requires us to remain aware and cautious of these risks. Cyber criminals target older Americans via phishing emails and non-secure website transactions through a facade of charitable donations, health care coverage, dating services, and much more. So, why are seniors easy targets and how can they stay cybersafe?
In one of our recent blog posts, “Are We Rich?” Raising Financially Responsible Kids, Kate Slocum wrote about the ways parents can help teach kids about money. Ultimately, the lessons she laid out can end up being the most important financial behaviors a parent can share with their child in terms of building a healthy and successful relationship with money. However, like with anything we try to teach our kids, those lessons will take time and effort before sinking in.
And while that’s absolutely the right approach, we think parents also deserve a short cut from time to time. So let’s skip the lessons (just this once of course) and talk about giving your kids a head start towards earning their first $1 million dollars. It's the "yes a balanced diet is important kids...but it's 8pm on a school night so we're making this easy and grabbing McDonald's" kind of effort everyone in the family can appreciate.
We can’t help but contemplate unlikely events, both good and bad. When you buy a lottery ticket, you know you will almost certainly not win, but you enjoy the minute-long fantasy of what you would do if you did win. The Tigers could get something going this season and win the World Series, says a hopeful sports analyst on the radio. The medical website shows that your symptoms indicate seasonal allergies, but it could be the rare disease that killed a man last year. There are many books in the world of investing, but many of the bestsellers are about the huge losses that most people thought were impossible. We call these unlikely scenarios extreme tail events or black swans.
During an episode of Comedians in Cars Getting Coffee, Jerry Seinfeld discusses with fellow comedian Kevin Hart the moment when one of his kids realized he was famous. The child was in second grade and came home from school and said “Dad, everyone knows who you are!” That statement apparently was followed with the question, “Are we rich?” In typical Seinfeldism, Jerry answered, “I am. You are not.”
In June of 1812 and the height of French military power, Napoléon Bonaparte crossed the border at the Niemen River and launched an ill-fated invasion into Russia. Commanding an army of 680,000 French soldiers and conscripts, Napoléon by some estimates started with the largest and most powerful military force ever assembled. Ironically, at the start of his campaign Napoléon had no real intention of marching on Moscow. A few quick battles, near the border and it would be over. As every schoolchild now knows, things didn’t quite work out according to plan.
So how did the Tsar’s peasant army manage to neutralize a force whose power vastly exceeded its own? As the war stretched on, it turns out the Russians had two enormous structural advantages: the French supply lines became overstretched with each advancing step towards Moscow, and the bitter cold of the Russian winter turned lethal for a French army that was unprepared. The fatal flaw in Napoléon’s campaign strategy was not that he picked the wrong battles, it was he deployed his forces against one foe when in reality there were three.
When it comes to sustaining a successful investment planning campaign, the challenge of recognizing the threats hiding in plain sight are remarkably parallel to those that confronted Napoléon. Ultimately, every investor needs to understand there are three disguised threats to their financial security and devise a plan that confronts all three simultaneously.