I’m a big believer in the power of simplicity. Take investing, for example. I could write about investing terminology like standard deviations, alphas and betas, but how long would it keep your interest?
When I have my car repaired, my mechanic fixes the problem, gives me the executive summary of what happened, and I pay the bill. As long as my car works like it should afterward, I don’t need, nor do I want, a lengthy, complicated explanation. In an exchange of value, he fixes what’s broke and I pay him to solve my problem. If I trust him, it’s that simple.
That’s why our performance reports are very brief and simple, but they convey what a person wants to know quickly. How am I doing, net of fees and expenses, not only for the last three months or year to date, but also since inception? Is my portfolio doing better than a “relevant” benchmark over time? What does the pie chart of my investments look like compared to its benchmark? Am I achieving my target rate of return?
We can provide the gory details if someone wants them. Like the mechanic who loves working on cars, I love to “talk shop” about financial planning and investing, but I’ve learned from the school of hard knocks that the majority of people just don’t want all of that information. I’ve found myself staring back at more than one client yawning and looking at their watch as I spew technical financial jargon at them.
Simplicity is also why our financial plans fit on a few sheets of paper and not 300 pages. But don’t let that fool you into thinking simple means “not complex” or “not elegant”. We leave no stone unturned when it comes to planning a family’s retirement. But we want to present it in such a way that it is understandable, interesting, and even fun. If a person doesn’t understand their financial plan, will they really care about its implementation?
In the final analysis, we want our clients to trust our advice, so we spend a lot of time up front crafting a financial plan and explaining our strategies and recommendations. Once we have earned their trust, they can spend more time enjoying their free time with their family and pursuing their hobbies and dreams. As Nick Murray said in his book the Excellent Investment Advisor, We want to have places in their heart versus places on a chart. Life is complicated enough!