Over the years we have observed a tendency for clients entering retirement to change their behavior with regards to their financial strategy.
Many more questions are asked. What if the market crashes now? Do I have the best strategy? Shouldn’t I be more conservative? Of course, the questions are important and should be asked. Yet, despite being answered, they keep coming up. Why after 10-15-20 years has our wonderful client suddenly lost faith in what we are saying? What is happening?
Then, it happened to me! While I am still not retired, and the prospect of “true retirement” is a long way off, a mental shift occurred that I always felt would not happen to me. After the sale of my equity in White Oaks, a switch in my brain toggled to a different way of thinking. I went from “I am a business owner” to “this is my portfolio” and I need to make it work! What can go wrong? Suddenly, I started reviewing the numbers. Numbers and concepts I have seen and worked with many times over my career as a Certified Financial Planner. Will I be alright? Do I have the correct strategy? What if the market crashes? What if something changes? OMG! I have gone through a significant change and my mindset is struggling to adapt.
A totally emotional response! Me, the objective planner with decades of experience fell into the emotional trap. Wow! I was NOT following the evidence as I am trained and have the experience to do! I was focused on what could go wrong and ignore the evidence that much more was likely to go right than wrong.
In retirement planning for executives and professionals, it is critical to follow the evidence of what works and does not. Paying attention to what may go wrong is appropriate, but not to the exclusion of the high probability that many things go right. Our world is full of potential problems, but that has always been the case.
In his post “The War Between Fear and Evidence”, Nick Maggiulli states ” Fear is loud. Evidence is quiet. Listen to the evidence”. Succumbing to fear/emotional based responses is very common. Jeremy Siegle, Professor of Finance at the the Wharton school at the University of Pennsylvania and author of “Stocks for the Long Run” remarked, “Fear has a greater grasp on human action than does the impressive weight of historical evidence.” Yet, it is the evidence we must pay attention to, not fear if a plan is to be successful. Yes, when it comes to comprehensive financial planning and retirement, fear is the loud voice creating feelings of uncertainty and doubt. So what is the evidence that people planning and entering retirement should be listening to?
Fear? I’ve always liked the acronym for fear: False, Evidence, Appearing, Real. Next week I will explore the key evidence that needs to be present for a successfully implemented wealth management strategy- evidence that turns a bunch of numbers into a solid, high probability plan to be relied upon.