I still have much to learn as a husband. Brooke and I celebrated 3 years happily married last week, and during that three years she has dutifully trained me in the fine art of being a spouse. She had a great deal of work ahead of her, but I admit she is patient. Looking back, one of the techniques she impressed upon me early on was the delicate nature of giving tactful advice.For example, rather than telling me simply not to do something wrong, she might tell a story or joke about someone else. In the course of the story she would take note of their unusual ways, gently nudging me away from that same mistake. Of course, the goal is not to passive aggressively knit-pick at me—quite the opposite. She is trying to save me considerable anguish; of course, she might be the one inflicting the anguish, but not without due warning. (Let it be known that I will never leave the toilet seat up again.)While I still have much to learn, Brooke’s lessons about imparting advice help me share advice with clients more effectively. Every so often we tend towards decisions and habits that may not serve our best interests. Clients rely on us to help them navigate their biases en route to their goals, especially in an unfamiliar arena where investments, taxes, and laws are already complicated enough.Like Brooke, we find it helpful to overcome biases with stories and analogies about others. By bringing someone else’s bias to a client’s attention, they become more mindful of their own actions. For example, some of our clients who are years from retirement worry about market downturns and wonder if they should sell. I often say “Imagine a store where everything goes on sale…and everyone leaves the store. Then, when prices are high, people flock back into the store and want to buy things that are expensive. How backwards is that? Well, that is how people naturally tend to react to the stock market.This works especially well when the discussion takes place long before an adverse event brings our emotions into play. Some of our most nervous clients who had this particular discussion actually called us during the latest downturn in the stock market to ask if it was a good time to increase their savings in their investment accounts. By proactively focusing on a common mistake with an engaging story or analogy, we protect them from that mistake in the future. These clients were able to overcome their underlying bias and benefit as a result.
As my partner Jim often reminds his clients (and myself), “With investing and planning, success is less about doing things perfectly right and more about avoiding the big mistakes.”
Jim’s wise words hold relatively true in marriage as well, and I happily report that Brooke and I seem to have avoided the big mistakes thus far. Thanks to the patient, loving guidance of Brooke over the years, I am undeniably a better husband and human being. However, she has much left to do. Maybe in another three years she can train me to consistently turn off every light when I leave, keep my valet space clean, and stop leaving food on the sponge. Cheers to those who handle our antics with grace and patiently guide our hand when we need it.
I sat there, doing my best to recognize that even if just for a moment, everything was right. There was nowhere else to be, nothing to be done, and no thought or planning that had to occupy my brain.Just the breath.At least, according to Sam Harris, the creator of the aptly named meditation app “Waking Up.”Over the last year and a half, Sam’s voice has echoed through my ears and attempted to tame the monkey mind that supposedly lives in all of us. For ten minutes most days of the week, I sit and focus on my thoughts for what they are: flighty, unceremonious blurbs that can theoretically pass through without requiring me to immerse myself in them. Despite my best efforts, I consistently become literally “lost in thought” and must begin again.It is a constant balancing act of mental yoga. In the beginning, I did not know enough to realize how bad I was. The better you get, the more you appreciate how challenging (and rewarding) the exercise is. It is an excellent, humbling lesson in self-patience.
Strangely enough, this mindfulness meditation bears remarkable resemblance to the process our clients often experience.
When clients first partner with us, they have questions, ideas, and concerns. The majority have questions they are not quite sure how to even articulate. Their brains are grasping slippery, unfamiliar concepts.
As we work through the planning process and create recommendations, we usually discuss several ideas that clients have never thought of before. Leveraging multi-year tax efficiency strategies, rebalancing away from strong investments, juggling AMT versus typical income tax, dollar-cost averaging, generational planning, and how to decide whether to refinance debt are all examples of this.
We often introduce a new framework of thinking for clients that requires their own kind of mental yoga at first.
As we implement some of these recommendations, we find that clients might slip back into more familiar mindsets like I do with my meditation. Fortunately, much like Sam Harris dutifully reminds me not to get lost in my own thoughts, we remind and revisit these slippery financial concepts and frameworks with clients.
This is also why our ongoing clients hear from us more than once or twice a year: it takes more than an annual meeting to create new habits and implement planning strategies.
It may seem like overkill, but if we have prepared and something rocks the metaphorical ark (like a COVID-themed stock market downturn), clients remember that we planned for this. For clients still saving for long term goals, they automatically ask themselves if it is a time to buy instead of panicking and wanting to sell. They don’t look at us with crazy eyes if we advise paying a little more in taxes this year.
Sometimes I forget to meditate. Sometimes my distracting thoughts win the entire time I was supposed to be meditating. It is easy to become frustrated with yourself and even quit. Similarly, sometimes clients chastise themselves when we call to check in. Maybe they have not saved like they planned, did not get around to updating their beneficiaries on an account, or forgot to find that 401(k) statement we wanted to review together.
The key is to be patient with yourself, and simply begin again. It is an ongoing process—we are not defined by any single failure. And when clients talk with us, we sink our judgement to the bottom of the ocean (except lately, we just leave it in the Zoom waiting room).
Simply begin again.
As we pulled into the parking lot of the FISH Food Bank off of Burnham Drive, AJ and I noticed a few people picking up food. One was an elderly man by himself; the other was a younger woman with a little girl. You could read their faces much like the first page of a worn, secondhand book. Their faces hinted at difficult liveCircling around the back, we unloaded AJ’s Jeep. This week at the office we ran a food drive and raffled off a few gift cards to local businesses. Two grateful volunteers ushered bags of food and soap into the building. Later AJ said “I think this is a great way for us to help in our community where there’s clearly a need.”We all felt great about the experience, and we noticed clients did as well. Some walked into the office wearing masks, but you could still see the little crinkles near their eyes that gave away their smiles alongside their food donations.
Two years ago, I gave a presentation about charitable giving for my Rotary club. During my research for the talk, I stumbled across a series of findings from the Science Generosity Initiative at the University of Notre Dame. They found causal relationships between giving (both time and money) and health. Americans who self-described as “very happy” averaged 5.8 volunteer hours per month. Those who were “unhappy” averaged .6 hours.
Economic theory tells us we maximize our utility (happiness) by maximizing our acquisition of goods. Yet as those food bank volunteers wheeled the last of the cereal and pasta away, I felt more fulfilled and “wealthy” after giving. Rather than “money buys happiness,” perhaps it should be “giving buys wealth”. Ebenezer Scrooge might agree with me.
Our perceptions of our own wealth tend to matter more than the raw numbers alone. Having enough to be comfortable is important, but as advisors we see people who struggle to spend money, even though they have plenty.
They do not feel wealthy. The logical part of them agrees they can afford to worry less and spend more, but the emotional part of them is still caught in survival-and-savings mode. That mode detracts from the enjoyment of our hard-earned savings, even if it serves us well initially.
Something we find helpful for those with that “fortunate problem”—consider finding a worthy cause to donate one’s time and resources. It acts as a form of permission (“They need my help; I can afford to lend a hand here. It goes to a good cause.”). In giving, you tend to find much more than you lose: community, a sense of purpose, and the feeling that you are in a position to give to others with less.
“There’s a great, big, beautiful tomorrowShining at the end of every dayThere’s a great, big beautiful tomorrowAnd tomorrow’s just a dream away”-- Disney’s Carousel of ProgressWe were once told by our parents not to talk to strangers, don’t share personal information on the Internet, and never get into unfamiliar vehicles. Today, we summon strangers to take trips in unfamiliar vehicles by inputting personal information on the Internet. Oh, and they often come bearing food and expecting tips.Human progress is quickly reshaping how we live. At times, it is disruptive. History and predictive experts tell us most of the jobs we know will be gone in a generation, new careers in new industries sprouting in their place.
At other times, human progress is reassuring. MIT Agelabs is a think tank charged with finding ways to improve quality of life during our newfound longevity (in 1900 most people living in industrialized nations did not make it to 50). In 2018, Agelabs identified three simple questions to ask ourselves to identify how we will fare as we age.
The answers to these innocuous questions touch upon some of the most meaningful parts of our lives: our independence, our ability to enjoy the simple things, and our relationships with those we care to share our days. Even since 2018, the answers to these questions for many people are changing for the better. Technology is making these actions easier by the year.
In the short run, technology changes the answers to questions in our lives. In the long run, technology changes the very questions we ask.
In our work, we constantly ask “How do you prepare for a future that changes so quickly?” When we sit down with clients and imagine their future, how can we believe in the plan we set, knowing the future is so uncertain?
Our recommendations are rooted in time-tested strategies, current law, and the best predictive research we can find. However, the truth is that much of this is based on faith. As I tell clients, my crystal ball works about 80% of the time—when I inquire about yesterday’s dinner. It doesn’t work as well for the future.
That notwithstanding, we have faith in human progress. Despite the negative headlines we see, tremendous progress has been made. 10% of the world’s population lives in extreme poverty--but in 1990 it was 36%.
Our plans are based on concepts that buy into human progress: the idea that we will continue to become better. We also usually assume we are hitting moving targets. We marvel at the goals and dreams our clients bring to us. How a client moves into their dream home looks crystal clear right now—and two years later it changes when they tell us their dream home is actually in France, not South Carolina. Two years after that it changes again, this time because the income tax code is overhauled, their son returns from France after all, or they realize the wine tastes just as good in the states after a few glasses.
Our financial planning process assumes things will change--it is an ongoing, fluid process. Just as airplanes are constantly off course yet eventually reach their destination, so too do we consistently revisit and adjust to ensure clients are on track. It is the only way to effectively plan for a fluid future--and thank goodness. Life would be boring and far too easy if that wasn’t the case.
Tucked away discretely alongside a collection of books are cards written from his own clients. AJ, like me, finds those notes of appreciation more meaningful than nearly anything else in his business. I witness firsthand how many hours he works before someone expresses that kind of gratitude towards him.My wife Brooke loves to run. Besides consistently hitting the pavement several times a week, she reads running articles and books. One of these books (“Let Your Mind Run” by Deena Kastor) inspired her to begin a gratitude journal this past week. She lists ten things every day that she is grateful for—and the rule is to never repeat yourself.During this unprecedented time, she inspires me to also focus on gratitude.
I speak for every one of us at Conestoga; many of our most powerful feelings of gratitude come from the gratitude of our clients. We freely admit that our personal identities are interlaced with our work—it is a byproduct of emotionally engaging with those we serve. When a client expresses real gratitude, it validates that we are who we want to be as a company, and as people.
Interestingly, our clients’ versions of their own gratitude list towards us are not what you might expect.
In my career as an advisor, no one has said “Conner, your ability to generate better risk-adjusted returns in my portfolio is meaningful to me, and I appreciate it. Your investment tax planning was a light in my day. That Social Security analysis really makes me warm and tingly inside.” While important examples of what we do for many clients, those are not what we hear about.
They thank us for simplifying and navigating Medicare when they were already overwhelmed with retiring. They thank us for the extra call to reassure them that they can afford to buy their first home, and for slowing them down to think through their choices. They thank us for their favorite flowers on their hospital bed stand, the long conversations en route to stepping away from their business, and the golf round they finally played without once thinking about their money. Clients have thanked me for a good night’s sleep, pushing them to ask for a pay raise, and for helping with their aging mother’s (or their son’s!) finances.
Brooke’s favorite weekend of the year is not Christmas—it’s in March when we run the Hot Chocolate 15k under the Space Needle. On mile 7, she decided we were each going to do a Gratitude Mile. Translated, for one mile she listed aloud what she was grateful to have in her life. She did it because her mind went from thinking about how difficult her run was to how fortunate she was to even be running. Gratitude helps the great things in life loom large in her mind, and makes life in the moment more enjoyable. She actually felt physically better after that mile, too.
I write this not to push you into penning your own gratitude journal (though if you do, I would be thrilled considering what science has to say on the subject). We believe in sharing the best of ourselves with our clients. Today, gratitude was top of mind. With gratitude, we can recognize value independent of monetary worth. Especially now, it can make our lives better.
We know you are likely half-inebriated with all the coronavirus news—it has shoved aside most of our priorities and taken center stage. And make no mistake: it is nothing to dismiss. Governments around the world are taking enormous steps to keep citizens healthy, support businesses, and pass legislation to stimulate their economies.Despite these steps, stock markets have fallen considerably. Clients are calling (if we haven’t beaten them to it!) to ask questions. Some are worried about their money, some are excited to buy while stocks are down, and some are unsure how to react. For those who are retired or close to it, a few voiced concerns about whether it will affect their income in retirement.Fortunately, we focus on financial planning while designing your investment portfolios. The financial plan is built to weather times like these. They include what I like to call “The War Chest”.
What is The War Chest? Imagine the large, wooden treasure chest a king might keep in his tower during wartime. Inside were gold, jewels, and coins that funded the kingdom’s protection! The War Chest is the emergency funds of a kingdom—in this case, your kingdom.
For those who draw income from their accounts, it is money set aside for when times are bad. Part of your portfolio is conservative, stable, and easily accessible. It keeps us from selling other investments while they are down. Some investments we use hardly fluctuate or continue to grow, even during times like these. We give up some growth in exchange for stability, but it pays off now. It keeps families from changing their lifestyle (any more than they already are!).
Remember: you will not need your life’s savings today. You will gradually need it, and we will carefully, thoughtfully generate income from optimal sources. Never hesitate to give us a call or shoot us an email—we are here for you. Having a year’s worth of cash available does not change the fact that there is a lot of uncertainty in the air. People will make mistakes in the emotion of the moment. With a plan in place, however, we can step back and recognize that this too shall pass.
In the meantime, we will ascend the stairs of the tower and bring you The War Chest. I heard one of the guards say there might be some spare toilet paper in there.
Clouds float past us, light and fluffy, every day. But are they actually light? The average cumulus cloud you see on a sunny day actually weighs about 1.1 million pounds! We know it is possible, but it still seems to defy logic.Inflation also seems to defy logic. We talk with clients about inflation all the time, yet it remains a difficult idea to keep in mind when we plan for the future.Inflation is an economic phenomenon where prices increase over time. Phrased differently, money slowly buys us less over time. There are a few reasons why this happens, which we won’t cover today, but the Federal Reserve targets 2% inflation per year. Depending on the time period, the US averages about 3-3.5% a year. In the 70s, inflation averaged over 7% a year!
What does this mean?1. Money sitting in a bank account earning .1% a year is, in real terms, losing value.2. Assuming a 3.1% inflation rate, it takes about 22 years for a dollar to lose half its value.3. Something that cost $100 in 1914, all else equal, would cost $2,608.88 today!
Look no further than the gas pump: in 1950 gas was a whopping 18 cents per gallon.
Of course, some industries inflate at much greater rates. According to the Bureau of Labor Statistics, college tuition averages about 7.4% a year, and healthcare costs average about 5.28%. That means college costs are doubling every ten years!
What does this mean for you?
Considering inflation within one’s financial plan is critical to life’s big moments! It helps keep Future You financially secure twenty years after you stop working and start spoiling the grandkids. Factoring inflation in keeps weddings affordable, vacations within reach, and the elderly with their dignity.
Inflation also changes how we think about risk. Retirees concerned about losing money often become more conservative investors. But investing too conservatively can lower our investment returns and make inflation much more painful.
A last thing that defies reality: the Greenland shark’s lifespan is reportedly 500 years. Thank goodness I am not a Greenland shark parent with kids aspiring to be shark dentists. Hundreds of years of inflation would mean really expensive college.
We commonly receive questions from new clients that stem from a “squirreling away” kind of perspective on their investments. Some come to us with many accounts and investments—each with their own unique purpose. A standalone mutual fund was purchased ten years ago for a future vacation or to help with a grandchild’s education. We see investment accounts meant to “pay the bills” in retirement, and we’ve even seen clients with their own “beef jerky habit” account or “fancy tie” fund.Each account originally had its own purpose and was treated separately from the others. While completely understandable and often convenient, it can lead to inefficiencies and higher tax bills. And for family members who aren’t in our own heads, it can be confusing!Of course, there are times where separate accounts are not only helpful, but critical. Separating a checking account from an emergency account, for example, keeps us from dipping into emergency funds.But we don’t want to be like squirrels, tucking away little acorns left and right. We can wind up with accounts and investments spread apart, not working in concert with each other.
We love helping with this. By stepping back and looking at everything, sometimes we can increase expected investment returns AND reduce how much risk someone is taking at the same time!
The difference in a big picture perspective? It can translate into retiring sooner, paying for an entire child’s college instead of a couple years, or maintaining one’s income with fewer investment scares.