Understanding What We Can Control

I’ve been reading a lot this week about uncertainty. As people come to grips with the outcome of the November 8 presidential election, many are wondering, “How will a Trump presidency affect my investments?”

Carl Richards, an advisor famous for his “back of the napkin” sketches to explain difficult financial concepts, featured the concept of uncertainty in his blog last week, and offered readers five tips for living with it. He also summarized the role of financial advisors in a simple, yet brilliant way: “It turns out that the job of a real financial advisor involves helping people make important decisions in the face of irreducible uncertainty,” he said. “Because after all the pretty forecasts and projections, no one has any idea what the future holds.”

Richards says we would rather be certain and wrong about the future than admitting we have no idea what to expect. But, he adds, the presidential election reminds us that we have less control than we’d like over what happens in the world.

Better Investment Experience

The theme of Richards’s blog reminds me of an Outside the Flags essay more than a year ago, written by Jim Parker, vice president of DFA Australia Limited. Parker noted that because most of us play multiple roles in our lives (such as business owners, parents, students and investors), we are motivated differently depending on which “hat” we’re wearing (or role we’re playing) at any given moment. For example, should a person who’s concerned about his job being replaced by technology NOT invest in technology stocks?

Parker writes, “The over-riding principle is to understand what we can and can’t control. We can have an opinion on government policy and we can express it through our vote, but we can’t control the investment outcome. We can have an opinion on what should happen to interest rates, but we can’t control what happens. So we diversify.”

The complexity of people and their motivations, according to Parker, highlight how inadequate so called “robo-advisors” or cookie-cutter financial plans can be. “The role of a financial advisor,” writes Parker, “is to help you understand these trade-offs and to separate opinion from fact, to balance your risk preferences with your desired wealth outcomes, and to accommodate your personal values within a diversified portfolio.”

Both Parker and Richards seem to be on the same page when it comes to the duty of care a fiduciary financial advisor provides to clients. And we couldn’t agree more. At AMDG Financial, we work with clients to separate reality from stories, fact from fiction, and bias from objectivity. We focus on the knowns (the things we can control), to create plans that – over the long term – can help protect our clients against the things we (and they) can’t control.

If the presidential election results have you worried about uncertainty, you’re not alone. It’s a feeling many of us – including Carl Richards – share. Separating the story from the reality, making a list, and doing something are good ways to cope. If we can be of any assistance in helping you regain some peace of mind, please contact us. We’d be glad to provide a second opinion on your investments, or help you create a diversified plan that’s personalized to your needs.

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