Scary Market Conversations. Are you having them with your financial planner? Are they having them with you? Do you want to be having them or do you just want someone to blame for the lack of market returns? The Truth of the matter is that we are living in SCARY MARKETS, there is so much uncertainty in the world at the moment, and this too leads to uncertainty for your financial plan. Below are the factual market returns over the last 6, 12, 24, & 36 months:
There is no hiding from the truth so lets rather DEAL with it TOGETHER.
If done properly, we have developed a lifestyle financial plan which addresses your current goals and deals with your desires. At this point in your life we are addressing what’s important to you now and into the future but the desired outcome is based on a whole bunch of assumptions, assumptions about what your future looks like, how much money you will earn, weather you will continue to earn into the future, how many children you will have, where you want to send your children to school, where you want to live, etc etc.. Along with those assumptions we also make assumptions on market returns.
Your plan will guide us to a desired return that we know you need to achieve. This return guides the asset allocation needed, the asset allocation dictates the risk you need to take to meet your desired lifestyle. The asset allocation is based on 50+ years of back testing (forward testing would be great, but the crystal ball seems to be broken), which then tells us how much of a certain asset class we need exposure to in order to deliver your desired return. The problem is again that this is also based on assumptions, assumptions that the different asset classes will provide the back tested returns and the assurance is that they will, OVER TIME. So the short of it is to just remain invested. IT’S NOT THAT EASY, IS IT?? It’s not easy for you and it sure is not easy for me.
BUT, I am here as your financial planner to be a sound board, an answer board, to hold your hand, someone you can talk to about your disappointment, someone you can scream at. At the end of day I am here for YOU. Not just when things are easy and going well, but more importantly I am here when things are terrible, when you are doubting your plan, or rather weather your plan will meet your requirements. I am here to have those conversations with you. This plan was co-created and when you don’t feel like it’s going according to that plan, then we need to have the “we need to talk conversation” and whilst I cannot control market returns, I can control how we react to them and I can provide answers and insight into whats going on and that will guide what we do next. Do we need to do something, do we need to sit tight? Information is key in this relationship. Do you want it? I have it, or have access to it, so lets talk about it. LETS HAVE THE SCARY MARKET CONVERSATIONS.
As your Financial planner, I want nothing more than for the plan that we have laid out to be fulfilled and if that could happen in a straight line, it would be great, but we all know it doesn’t work like that. Things change and we have to adapt. The idea of you not meeting your desired outcomes scares me more than it does you and I never want either one of us to experience that ALONE, so we will address the, “What are we going to do now?” questions. The, “how must we react?” questions. “When do we make a change?” questions. We will deal with scary market conditions head on and not head in the sand. I have been in the industry for 8 years now and whilst I have never experienced market conditions like these (except for going through them with you in the last three years), I know that when markets have crashed in the past, they have always recovered, not immediately, but in the years that follow it always does.
We can see from the above DOW JONES chart, that the sit tight conversation is the right one in the looooong run and whilst your investment strategy may be buy and hold, your financial planning strategy most certainly isn’t. We want to know whats going on, why it’s going on, is it just you that its happening to and to be honest if the market is experiencing a great depression like period, your investment returns are only one aspect of your life that is under pressure. Your job may be under pressure, property prices may be under pressure, the future of education may be under pressure and all of these are things we need to address over and above the market returns. We know they will correct, but if your company is cutting jobs, what does that mean for you and your financial plan? We need to run those scenarios, we need to adjust the context of the plan, we need to future proof the things we can control and part of being in control is dealing with life’s event as they happen. The door is always open, you just have to want to come inside.
To ensure your plan ends in success, we need to be working on it, weather thats once a year, once every six months, once a quarter, you know what you need and you need to make sure your planner knows that too and if you are getting what you need, you need to speak up! You can’t control the markets but you can control your plan. Have the conversations, the easy ones and the tough ones, its the only way to put your mind at ease.