By Allen Giese, ChFC®, ChSNC®, CLU®
While attending a conference about a month ago, a much younger advisor I had the pleasure of having coffee with asked me what, after more than 30 years in this industry giving financial advice, is the most important lesson I’ve learned.
While he eagerly waited for the “old man” to impart some sort of deep wisdom, I sat there, thinking through a few ideas about what has been the pinnacle lesson I’ve learned in this wonderful career.
The thought struck me that maybe the answer is that you really can’t build an effective financial plan if you don’t have meaningful goals. Because without goals or objectives, how do you know what to invest in? How do you know how much risk you should be taking?
Without question, the most common goal we see in our practice, being primarily lifelong investors, setting ourselves up for the highest probability of having the best investment experience we can have over decades (not weeks, months, or even years), is the goal of simply being able to provide an ongoing stream of income, pace it with inflation, and not run out of money before we run out of life.
Pretty simple … but definitely a goal that’s measurable and gives us a clear insight into what we need to accomplish with our investing. I don’t believe enough time is spent teaching young advisors this concept—that without a goal, building the right portfolio is an impossible task.
But then I had this other idea. Perhaps the answer to his question was, having learned through some rather turbulent markets over the past 30 years that boring, stodgy core principles, like having faith in capital markets and their ability to correct themselves, their ability to move on to new high territory and almost immediately adapt to this constantly changing world we live in, actually does make a difference.
And that having a disciplined investment approach and process that force you to do what you know you need to do and have been trained to do, even though nobody around you is doing it, adds tremendous value over the years.
And that having the patience to understand that markets work on their terms, not mine. All I can do is keep my risk exposure constant and intact, but sometimes I simply have to wait it out to reap the reward.
Yes, that’s definitely a big lesson learned. But we’re not quite there yet.
Perhaps the answer is really a combination of both of those ideas. Because without those two concepts of being a goals-based investor along with having core principles about how markets work, people tend to fall prey to the age-old financial trap of basing investment decisions around current events and (heaven forbid) what the financial press is telling us.
After more than 30 years of being a bit more than a casual observer, I’ve learned that people who depend on the financial press for guidance almost always end up sacrificing their wealth and never seem to stay on track toward their goals.
If those first two lessons mentioned above have been learned, this isn’t a problem. Because if I have meaningful long-term goals that tell me what I want to accomplish with my money and investing, if I have faith in capital markets, a disciplined approach, and the patience to not try to force returns against the will of the market, then what do I care if a few regional banks go out of business—or whatever the apocalyptic financial event du jour is?
It’s not going to take me off my game or take my eyes off my goal. It’s not going to change how I’m going to get there. I already know. But what it will do is teach me that maybe the financial press doesn’t really have my best interest in mind and is just playing to my prurient interests to increase its readership, viewership, and clicks. It teaches me to go read or look at something more interesting and worthwhile.
So we sat there for a few minutes, and after all these thoughts, I simply replied, “You know, that’s a great question. I think I’m still learning.”