Planning, Pilots, and Profits

The last several years in the financial markets have been truly transformative. Strategies that were seen proven and effective methods for decade suddenly stopped working and trillions of dollars of wealth instantly disappeared. All of a sudden, the financial “experts” began to lose their luster and were left wondering what had happened to all of their projections and formulas. Economic reality proved the methods of the large financial institutions were broken.
As a result of the tremendous upheaval in the markets, the template financial approach is gone for good. The best advisors help you understand how to deal with uncertainty. An honest conversation about uncertainty brings up questions not found on pie charts or in the academic comfort of diversification theory. Uncertainty is a fundamental law in financial markets and successful planning requires an approach that is specific rather than generic.
To do the best job, your advisor must be committed to helping you conduct a training exercise. I say “training” because the best decision-makers simulate various scenarios in their minds prior to implementation. Testing the impact of bad events is a critical part of the exercise. Think about this; when you take an airline flight from point A to point B, you feel comfortable with trained pilots not because they are trained to handle smooth flying, but because they are trained to handle turbulence.
Theoretically, anybody can hold the stick steady as the plane travels along uneventful skies. The value is this: when a storm arises, only those with solid planning (training) can safely pilot you to the ground. Their value is they have been tested in the stressful environments prior to the stressful event (mental stimulation), thus giving you a better chance at survival. The financial planners that were not properly trained to handle turbulence failed to protect their clients’ wealth. They had been used to the smooth skies of the 1990s and mid-2000s. When 2008 hit, they were left at the controls wondering which way was up.
With that in mind, it is important to choose an advisor that has experienced turbulent times and navigated them successfully. The days, moths, and years ahead will reward those who have developed thorough mental simulations. Now’s the time to revisit your advisor, revisit your plans, and make changes before the next storm.
So who’s piloting your financial future? Who’s drawing your plans? Who’s protecting you? Have they positioned you to reduce the chance of catastrophe or have they increased its likelihood?