Over the past decade, we have been reminded like never before that what lies ahead is uncertain. It is not like that we ever knew what the future would be; it’s now very obvious that we don’t. Unsurprisingly, consumers have noticed this too, creating an uneasiness that has wedged itself in between the client / advisor relationship. Out of this uneasiness, a responsible mindset has emerged in the private sector (unfortunately it doesn’t appear that is also true in the public sector). The private sector has aggressively and significantly reduced debt. The public sector has aggressively and significantly increased debt. The combination only increases the sense of uncertainty.
As a financial advisor you have the opportunity to prepare your clients for the truth, and the truth is uncertainty. When it comes to financial implications, the truth is how long one lives is uncertain, one’s health status is uncertain, the strength or weakness of the economy and the markets are uncertain.
All of the above truths have financial implications. Living a long life has financial implications. A prematurely shortened life has financial implications. Being sick or hurt or needing assisted living or needing nursing care has financial implications. Robust or weak economies and bull or bear markets have financial implications. If you do it right, you should be able to say to your clients, “If you follow my advice, which will prepare you financially for the certainty of uncertainty, then whenever you need money and for whatever the reason, you will have a smart place to get it.”
Unless you have a proven track record of being able to predict the future (when people will die, whether or not people will get sick, what will happen in the global economy, will we have a bull or a bear market, etc.), it is in your best interest and certainly your clients’ best interest that you specialize in preparing for the future versus predicting it.
The Smart Money Philosophy prepares people for the certainty of uncertainty. The Smart Money Philosophy leverages one principle, two rules, and four skills:
- The principle is responsibility. In other words, people are responsible for the choices they make.
- The two rules are:
1. Always prepare yourself for the certainty of uncertainty.
2. Always make your financial decisions after first reflecting on your personal values.
The four skills are:
- Recognize (your thoughts, your emotions, your actions)
- Reflect (on your personal values, on the big picture, on your goals)
- Reframe (your thoughts)
- Respond (with a choice consistent with your goals and your personal values)
If you were to outline the Smart Money Philosophy, it would look like the following:
I. Death (financial implications)
II. Life (financial implications)
A. Sick or hurt or needing care (financial implications)
B. Healthy (financial implications)
1. Strong economy and markets (financial implications)
2. Weak economy and markets (financial implications)
This outline provides a simple and clear framework to make smart decisions. Reflecting on values before making decisions improves the probability that the decisions will be smart and will therefore, be more likely to prepare oneself for predictably unpredictable events. Values reflection won’t make anyone smarter, but it will make us more rational, and unfortunately irrational decision making trumps high IQ every time.
You will find the four skills mentioned above, what we call the four R’s, will help you make smart, responsible, values based decisions with your money and your life. It’s time to become financially intelligent and prepare yourself and your clients for the truth, and the truth is the certainty of uncertainty.