Sometimes, You Just Know


Twenty-two years ago, I was a finance major at the University of Idaho, where I was studying modern portfolio theory and managed a small portfolio for the university's business school. We utilized multiple securities analysis techniques, as well a piece of software – which only the University of Idaho and Stanford University were allowed to use – to construct the portfolio. 

I knew the research we had done for that portfolio would pay off, and I realized we were on the leading edge of great advances in construction. There are just times in life when you, "Just know."  

It was years before I saw anything in the marketplace that constructed portfolios any more efficiently or effectively than we did at that time. Today, you can find more powerful tools on just about any financial site you visit. In fact, the accumulation side of this business has become so seemingly commoditized we now have robo-advice that, according to a recent article in Investment News, is nearly indistinguishable from much of the human advice. 

For years now, I've been studying the decummulation side of portfolio construction and once again in my life I feel like, "I just know." I'm working with a team who’s on the edge of great portfolio construction; only this time, it's for the back nine of life.

Most advisors, as well as many clients, have heard about the risks of retirement, yet portfolios continue to be constructed as if those risks were some kind of old wives tale. If you and your clients have figured out a way to minimize sequence of returns risk, inoculate against interest rate risk and volatility risk, and have eliminated longevity risk, all while keeping tax efficiencies and Social Security maximization in mind, then we will be of little help to you. 

On the other hand, if you would like to have a team to bounce ideas off of, or actually help construct portfolios like these, then please call on us.

The Bottom Line: This business has become too complicated for any one person to be an expert in all areas and still have time to take care of clients. I know our team can be your experts on the leading edge of decummulation for your clients’ retirement portfolio. 

A One Man Wrecking Crew


If you followed the NBA Finals, you know the Cleveland Cavaliers lost two of their five starters late in the season and in the playoffs. Regardless, the team made it to game six of the finals before giving up the championship to the Golden State Warriors, who have the league’s MVP, Stephen Curry. Maybe the best all-around player is LeBron James, who carried his injured Cavaliers team through the end of the season. 

Everyone was cheering for the underdog team from Cleveland in hopes that LeBron could single-handedly win the series for the city. But while everyone was talking about how he’s a one-man wrecking crew, they were also talking about his stamina, or rather lack thereof. One of the greatest athletes in the league, he appeared to be tired and run down in the playoffs. You can’t blame him. He was forced to score more points, grab more rebounds and assist in more baskets than his teammates. 

I think the Cavaliers demonstrated why a collaborative team approach is best – in basketball and financial planning. With Kevin Love and Kyrie Irving on the sideline, LeBron was forced to essentially do everything to fill the gap they left. While he made it work during this series, it clearly took a physical toll. 

The same would be true for your financial planning practice. Too often, I see planners attempting to be the LeBron James of financial services. They try to do too much. In the end, they get tired, lose focus and makes errors. Their client base grows too large and the personal contact their clients loved quickly evaporates. The solution: Make sure you build a team infrastructure into your planning process. If the primary relationship manager (you) aren’t available, then envelope your clients with the bench strength they deserve (your team). 

By building a team with a strong supporting cast, you can build a sustainable, profitable business model that your clients will appreciate. While you might have short-term success (one series) with just one superstar, long-term success (a championship) with a team approach creates value in your business and makes it referable.  

Bottom Line: Being the superstar might work in the short run, but having a strong bench adds value to your client relationships, which translate into wins for you.  

Tools I Didn’t Know Existed


One of our carrier partners visited a couple of weeks ago, and I talked to the wholesaler about her friend who is an ultra-marathoner, running more than 100 miles in races. We also talked about my running, which had been reduced because of some hip pain I began experiencing. At that point, I was only able to run one or two miles before my hip hurt so much I had to stop running.  

The wholesaler mentioned a shoe I’d never heard of before – the Hoka One One. She had me look it up right away, and at first glance, I thought it looked like a heavy brick you would attach to your feet. She talked about the cushion and explained that her friend was able to complete long runs comfortably since moving to this shoe. I remained skeptical. I’d been loyal to the same brand and same shoe for the past seven years of running. Every other time I tried a new shoe, I got blisters, foot pain and hip pain, so I always ended back in the same model as before.  

Reluctantly, I decided I had to try something to help my hip, and there was specialty running store where I was going to be staying for the weekend. I purchased the Hokas – they were the most expensive running shoes I had ever purchased. However, they are incredibility comfortable. In the prior 30 days, I had only been able to run about 20 miles total due to the pain. In the first week of wearing the Hokas, I’ve been able to run 11 miles comfortably. I’m back to increasing my mileage, improving my times and enjoying my running. 

I share this experience as an example of, “You don’t know what you don’t know.” I was locked into one shoe because I had success with it previously. But, my body has changed – as do economic environments, client expectations, client goals and purposes of monies. 

We have to be more open to looking at alternatives. Even slight adjustments or updates can greatly enhance our chances for success. Instead of thinking about your old, comfortable shoes, try to think about how the new, improved, better chance for success shoe could help you. I challenge everyone to change their mindset, be open to new ideas to help clients, and be focused on finding solutions instead of remaining in their comfort zone.

The Bottom Line: We get comfortable with the way we do business. Challenge yourself to think differently, act differently and create different results with clients using different strategies.  


Why Financial Illiteracy is Like a Cancer


Recently, I read an article from Yahoo Sports about former Indiana Pacers player David Harrison. After earning $4.4 million in four seasons with the NBA, plus some time overseas playing professionally, the 32-year-old basketball player is nearly broke. We’ve heard about these scenarios before, but this story exemplifies why financial illiteracy is like a cancer. It does not discriminate by wealth. It does not care about race or gender. Simply put, not understanding your financial situation and circumstances can ruin your life.  

Harrison can’t even work at a local McDonald’s restaurant, not for lack of trying. Customers recognized him – it’s difficult to miss a 7-foot person taking your order – causing them to ask questions and end up taking 40 minutes to order, according to the article. So he had to leave McDonald’s. Banks foreclosed on his home and tried to repossess his car, and he still provides for his infant son. He says he can’t even afford to finish the final 16 credit hours needed to earn a degree (he left college early to play in the NBA). Needless to say, his life now is extremely different from his life when he was playing in the NBA. 

Even though most of us won’t be retiring from the NBA, this example shows the importance of having a reliable stream of income when your main source of income stops – no matter your age or profession. It’s something that’s all-too-often overlooked. I’m sure Harrison would appreciate having some level of steady income right now. And, he probably wouldn’t care about the rate of return on that income – he would be more focused on the bills he could pay instead.  

The Bottom Line: Financial literacy begins with education and planning. Understanding income needs and potential pitfalls could help your clients avert many hardships later in life.