OUR PROCESS- The Experts Were Wrong Again
The timing of this post is relevant to the topic. I am writing this blog at the end of one year and the beginning of another. Every year at this same time, the financial media reflects on the past and predicts the future. The articles on the past are typically about how badly everyone guessed 12 months prior. And despite the experts being chronically wrong, the consumer is wide-eyed and hungry for what these same experts think will happen in the coming year. Go figure! Personally, I find this annual ritual to be entertaining. I also use this to renew my appreciation for having a process that is in every way superior.
To help understand the folly of so many seemingly intelligent people armed with billion-dollar research budgets prognosticating about the future, you need to understand the industry. Nearly the entire financial services profession is designed to sell product or to sell information advertised as giving the gambler aka investor an edge to win on more bets. And despite knowing better- both parties continue the charade annually ad-nauseum.
Right on que, the WSJ ran a big article on how the Experts “flopped” in the closing days of 2022. And also right on que, financial media is filled with the “expert’s” predictions for 2023. I’m sure for legal liability reasons, virtually every “expert” getting quoted begins with some version of, “While no one knows the future…” This disclaimer is then followed by their strong conviction of precisely what will happen in the future. It is quite comical.
VFA,Inc. does not sell financial products. We fully understand the futility of guessing what will happen in the future. Refreshingly, we model thousands of possible future outcomes and measure how many of them would result in our client’s goals being funded. The process is all very scientific and boring- but it works. At any point in the present, we can provide our clients with their chances of meeting or exceeding their goals- NO MATTER WHAT THE FUTURE BRINGS.
By controlling every variable that is controllable and then measuring the degree of uncertainty that exists in those factors beyond our control, we are able to provide our clients definitive and actionable guidance to live their BEST lives. While not every firm employing the same process (Goals-Based Wealth Mgmt) establishes the same parameters, our firm deems that the odds of meeting or exceeding your goals need to be no less than 75%. In our opinion, a funding confidence below 75% leaves too much chance that the future will not work out as desired- i.e. the plan is UNDERFUNDED.
Conversely, if over 90% of all of the future possible outcomes point to our clients having ample capital to meet or exceed their goals, we say the plan is OVERFUNDED. In fact, a funding confidence over 90% suggests that our clients are making an unnecessary sacrifice in some area of their life. The whole concept of living your BEST life boils down to an artform of finding balance between optimizing your quality of life both today and in the future.
On a scale 0% to 75% is UNDERFUNDED and from 90% to 100% is OVERFUNDED. That leaves only a narrow tranche of fifteen points from 75% to 90% that becomes our planning target. This is what we affectionally call the COMFORT ZONE. It represents the chances of confidently funding your best and highest goals without needless sacrifice – the envious state of securing both COMFORT and CONFIDENCE.
So, whether it is the first day of the year or any day thereafter, we provide our clients with a set of advice that give them both the comfort and confidence of meeting or exceeding their high-valued goals no matter what happens in the next year, three years, decade, etc.
This is planning done right. This is the future of Advising.