March 24, 2014

A Better Plan

A Better Plan  |  A Better Portfolio  |  A Better Price


Our goals-based planning process is designed to help you identify, prioritize, and attain the goals that you value most – like a secure retirement – while avoiding unnecessary risks and sacrifices to your lifestyle. It’s designed to help manage the uncertainties of investing; to proactively track your progress toward attaining your most important goals and to help you make appropriate adjustments when life, or the markets, throws you the inevitable curve ball. Simply stated, it’s designed to provide you with confidence that your goals are reasonable, affordable and attainable.


The process starts with a single, seemingly simple question: “What do you want?” What do you want to do, to learn, to own or to become? What are your goals and priorities? Do you want a cabin in the woods? Do you want to take a sabbatical or change careers? Do you want to pay for your grandchildren’s education? Or do you simply want a secure retirement?

Wealthcare2Once you’ve established and prioritized your goals, we’ll “stress test” them for you. Stress-testing is a forward-looking process that subjects your Plan to a variety of possible market conditions and investment strategies. It can help determine which strategy is likely to give you the best chance of attaining your most important goals with the least amount of “sacrifice” to your lifestyle (e.g., without forcing you to save more than you’d like, spend less than you’d like, or take unnecessary levels of risk).

Stress-testing also allows us to analyze your various priorities from the standpoint of how they relate to your level of investment risk. Sometimes the slightest adjustment can reveal options that might surprise you. Maybe delaying Social Security until age 70 allows you to significantly lower your overall level of investment risk, or to retire a year or two earlier than you had hoped. Maybe leaving a slightly smaller estate means realizing a long-held dream today. Maybe retiring earlier isn’t as important if you can travel more now and during retirement.

The end result is a Plan where your investment choices are “in-balance” with your life’s priorities. A Plan that gives you greater certainty that you’ll attain your goals. A Plan that can adapt when life happens.



That’s why we constantly monitor your Plan, tracking your portfolio’s performance relative to your most important financial goals and your “Comfort Zone”. If an unexpected expense or unfortunate market performance threatens to push you out of your “Comfort Zone”, new advice can help keep you in it. If market performance is stable, new advice may still refine your choices. If fortunate performance rewards you, new advice may allow you to spend more or reduce your investment risk. But, whatever happens, your Plan will adapt as the opportunities present themselves.



The foundation of our approach to investment planning is simple: although taking risk is a necessary prerequisite to earning a return, not all risks are created equal. words-risk-and-reward-smallThere are good investment risks – risks that are often worth taking because they have positive expected returns; and there are bad investment risks – risks that are completely unnecessary or whose associated returns are most likely to be negative.

Prudent investing is largely about playing the odds. It’s about planning and probabilities, discipline, structure and costs. It’s about optimizing the probability of meeting the goals you have set for the only life you have to live on this planet. It’s about having the discipline to avoid the (many) risks that have negative expected payoffs, while exposing yourself to those risks that have positive expected payoffs – but only to the extent that taking those risks buys you something of value (like a cabin in the woods, or a secure retirement).

While it’s impossible to completely eliminate uncertainty from the investment planning and management processes, there are many risks that investors expose themselves to that can be avoided, minimized or, at least, managed:

  1. Underperformance Risk – the risk of permanently under-performing the markets due to the use of expensive active investment strategies.
  2. Structure Risk – the risk of ignoring the benefits of diversification, asset-allocation, and “factor loading”.
  3. Behavior Risk – the risk of falling prey to any of several behavioral biases that impede our ability to invest rationally, which is most often driven by the insidious stream of investment pornography that permeates modern financial news sources.
  4. Advisor Risk – the risk of trusting your money to the wrong type of advisor.
  5. Cost Risk – the risk of paying too much in advisor fees, mutual fund fees, trading costs and taxes.
  6. Planning Risk – the risk of misallocating your resources relative to your most important financial goals. Planning Risk includes the risks of 1) taking too much (or too little) portfolio risk to meet your financial objectives, 2) having unreasonable expectations about future market returns, and 3) failing to consider sequencing risk and longevity risk.
  7. Complacency Risk – the risk of not acting to remove any/all of the above-mentioned risks from your investment strategy.