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Van Der Noord Financial Advisors

Doing Better than Your Friends






Such overly generalized statements are indicative of our first hiccup in an otherwise smooth transition to Goals Based Wealth Management (GBWM). If I’ve heard this from one or two of my clients, I must assume that several more are thinking it. So, in the spirit of “cutting straight” the truth and administering an antidote to the pervasive myths still apparently dogging a few of our clients, here goes…


There are many similarities in both the style and terminology used in managing a pension fund as well as managing personal wealth. And I believe that exploring these similarities will be helpful.  Below is a comparison of terms





Money flowing in



Money flowing out

Liabilities or Benefits

Spending Goals

What is left at the end

Terminal Value

Estate Goal

Standard Deviation of returns

Investment Risk

Investment Risk

Too much money



Not Enough Money



Adequate funds exist to meet obligations




A pension manager constantly is measuring the funded status of the plan. If the plan becomes underfunded, changes are made immediately to contributions, liabilities, terminal value, investment risk, or some combination.  Crucial to a pension fund’s ability to make good on its promises is that the funded status is measured in dollars ($), not percent (%) and changes are made as soon as the plan becomes either over/under funded. Pension funds do not stick to a so-called long-term strategy and hope that the successes and failures average out in the end.  


Similarly, when a client’s Goals Profile suggests that their high valued goals are either over/under funded, changes are made to maintain a funded status AT ALL TIMES. For example, let’s say that your goals can be met or exceeded with only a 30% allocation to stocks. In other words, your retirement dreams are funded without needing to take much risk. Now let’s assume in the following year the markets misbehave. For the sake of this example, let’s assume that the only factor we can change is the investment risk. If the markets misbehave enough to cause your plan to become underfunded, then more risk would be injected into the plan to bring the returns up and restore the plan to a funded status. Conversely, if the markets do better than expected and the plan becomes overfunded, the excess or unnecessary risk would be taken off the table to restore the funded status of the plan. In other words, asset allocations are changed based on the funded status of the plan rather than on any prognostication of future market direction. This is being a real wealth manager rather than being a returns manager. Consequently, the only reason to add risk (i.e. own more stocks) is to maintain the plan in a funded status.





So, with this as a foundation, let’s take a look at the title again and then make some comments.


First, do you really believe it is accurate to say ALL your friends… or EVERYONE you know? Such over generalizations are seldom accurate. Second, we have to presume that these statements are being made because the stock market has done very well this year. So we must also presume that ALL your friends/EVERYONE you know is either only bragging about the part of their portfolio that is in stocks or they do in fact own a lot of stocks in their portfolio and their whole portfolio is doing well this year.


If they are bragging only about the part of their portfolio that is in stocks, then you have inappropriately assigned their bragging on a portion of their assets to include all of their assets. You also have a portion of your money in stocks and can therefore do some bragging yourself.


On the other hand, what if your friends really do have most of their money in stocks? Taking on this level of risk can be justified for several reasons…


They don’t have enough money to support their needs.

It’s OK to have friends who are poorer than you, but perhaps they are not the best source for financial advice. If you have enough wealth to reasonably meet or exceed all of your goals without having to take on much risk, then you are most blessed. Make every effort to have them imitate you rather than you trying to imitate them.

They are chasing whatever is hot at the moment.

Returns are an extremely unreliable indicator of wealth. Furthermore, higher returns seldom translate to having more money. What is the point of having impressive returns if you run out of money? $ are currency and % are just fractions.


When stocks cool down, where will they go and when? This is called timing the market – AND IT DOESN’T WORK. Sure, you get lucky and make a right call once in a while, but you have to be able to string together being right every year for as long as you keep breathing.

They don’t have a plan designed for their needs and wants

You can be a positive force in their lives by introducing them to real wealth management

They like to gamble or have stable income that makes protecting wealth superfluous.

We wish them only the best of luck


Now, let’s discuss what is implied in the phrase “doing better than me”.  Life is precious and can only be lived once. If you don’t live it to the fullest and make the most of every moment, there is no going back. I suggest that only those who truly know where they stand and what they can do in comfort and with confidence are doing well. Only those who are able to manage their wealth to insure they have enough money to do what they want, when they want, for as long as they want are in fact “doing well”.


It bears repeating. The financial services industry adds over 7% or nearly one trillion dollars to the national GDP. This is a trillion dollars of fees and commissions and other costs that are taken from the investing public!!! This is achieved primarily by selling an overstated importance of time-weighted returns that essentially allows them to measure themselves against themselves. They sell the lie that higher returns equal more money despite the fact that it has been proven 7 ways to Sunday not to be true. In fact, the Supreme Court recently ruled that a retirement plan’s fiduciary responsibility needs to be measured in dollars rather than in return percent. The case being argued (Larue v. DeWolff, Boberg, and Associates 2008) involved a client who suffered from having a plan severely underfunded despite the investment advisor having posted benchmark-beating returns. What the Supreme Court is saying is to pay attention to the $$$ and not focus on the %%%. In other words, any return, let alone market beating returns is an unreliable indicator of wealth.


Remember, no one can control WHEN the market experiences over/under performance. And WHEN you get a return has an even greater impact on wealth than the average return itself. By applying a low-cost diversified passive total market portfolio strategy, we achieve measured performance within a highly defined range of possible outcomes. This allows us to measure the chances of meeting or exceeding your high valued goals with a high degree of certainty thereby insuring that making the most of your life is maintained in a very enviable fully funded status.


So with all sincerity and conviction, I can virtually assure you that you are doing much better than your friends who are still chasing returns. I also safely wager that they want what you have- Comfort with Confidence. Our GBWM process is powerful and effective and we look forward to sharing it with those you care about. I am depending on you to sing our praises.



Richard Van Der Noord, CFP

Certified Financial Planner

Registered Investment Advisor Representative



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