I have been using the term "uncertainty" a lot lately and usually that involves the word "volatility" in the same sentence.
And while it is my job to try and get some perspective on what is happening in the short-term in financial markets, trying to separate the reality from the noise, it is also important to remember that all this short-term "stuff" will soon fade and what is truly important is what remains: the focus on long-term goals.
What I enjoy the most about my job is helping people.
My favourite is after we have finished the first go-round of a Wealth Forecast and looking into the faces of our clients and seeing the huge sense of relief as they finally get a glimpse as to what the future holds and 90% of the time it is significantly better than they had surmised.
Because everybody has goals for the future, if at the very least, just making sure that they have enough money to live a comfortable life to the end.
Sometimes I have to drag them "kicking and screaming" down the road of information gathering that is the necessary part of the preparation of the Wealth Forecast, depending on the complexity of their situation and how organized they might have been beforehand.
But the end result is worth all the work to get there.
Because now there is a plan. A plan for the future. Now we can develop a strategy for making the plan work. You cannot have a proper investment strategy until you have determined the direction that you are heading in.
You have a plan.
You have a strategy to make it work.
Then you need to monitor the progress of your plan.
The world is a dynamic place (and seems to get more so as time passes) and there is lots of short-term stuff that will need to be considered along the way that may impact your plan and require adjustments to the strategy.
So we meet regularly to make sure your goals are still the same (or if they have changed, we re-work the plan) and that we are still on target to meet them. If not, we make the appropriate changes to get the plan back on track.
It is a great tool for decision making. We can also develop "what if" scenarios that can help you determine what new goals might have on your plan: how might a major purchase, more education funding or charitable giving impact your net worth and your estate?
In the long-term, risk is whatever may preclude you from achieving your goals. If we know your goals, we know and fully understand your risk and can then take all the important steps to mitigate it.
Without a plan, you cannot fully understand your risk and risk becomes impossible to properly define. You cannot have an investment strategy if you don't fully understand your risk.
It defeats the purpose of saving and investing if you do not have a long-term plan based on your goals and understanding the risk of not achieving your goals.
A Wealth Forecast (prepared by a Certified Financial Planner) will do all of this for you.
Presenting Wealth Forecasts to our clients is the best part of my job, if for no other reason, do it for me!
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist