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Getting Our Way

Published by: Jeff Hall, CFP® Date: March 01, 2016

Our son is at that age where he knows how to work his mom and dad. If one of us tells him no, he often goes to the other to see if he can get the answer he wants. Needless to say, if you have kids, you’ve experienced this shrewd behavior. The reality, though, is that we adults find ways to get the answer we want as well, especially when it comes to our money and investing.

We just want more –My former pastor used to say that if you know the “why”, you can deal with almost any “how”. This particular comment had nothing to do with investing, but it’s still a good way of accepting the uncertainty of the capital markets. If we can get beyond chasing returns for the sake of getting more or beating an index and instead find purpose with our portfolios, it’s much easier to bear the ups and downs.

We trust blindly – Bernie Madoff claimed 10% returns over an 18 year period. There have been plenty of instances throughout history where this occurred; however, what made Mr. Madoff’s investing prowess so popular was that he claimed to achieve these returns with 1/10th of the volatility associated with the stock market. To put this in perspective, imagine getting double digit returns while investing solely in 6 month treasury bills. He duped thousands of people around the world for tens of billions of dollars and he got away with it because everyone believed in him.
We follow misinformation – A recent study of online retirement tools conducted by 4 researchers found that “in most cases, the available offerings are, extremely misleading.” The study compared the retirement outcomes of a hypothetical married couple using online calculators from prominent organizations and outlets. The private software found that the couple had only a 53 percent chance of a favorable retirement…yet only 11 of the 36 online tools were successful in cautioning the couple of a shortfall in retirement. That means if you’re looking for help online, you have a 30% chance of getting sound advice. If the input contains information that is incomplete, inaccurate or makes unreasonable assumptions, then the outcome could be misleading.

We don’t question those with questionable motives – the financial services industry landscape is littered with landmines of conflicts of interest. Products are sold everyday with surrender charges which is the industry’s term for extortion fees. If you decide to seek help, look for someone to stand between you and a big mistake as opposed to someone who will stand between you and your money. Thankfully, the Department of Labor’s upcoming fiduciary legislation covering all retirement accounts should help reduce the shenanigans.

I recently heard that the definition of stress is the difference between where we are and where we want to go. Mistakes are made in our financial lives when we attempt to force answers we want to support the outcome we think is correct. When it comes to our money, we must be careful that our pursuit of peace of mind isn’t clouded with our desire to get our way at any cost.

Jeff Hall, CFP® is a Senior Financial Advisor with Rather & Kittrell. He can be reached at jhall@rkcapital.com