Jean WolfeCFP, CIMA, CPWA

Vice President

Minnetonka Office
Phone: (952) 249-7617
Toll Free: (888) 831-6426
Fax: (952) 249-7650
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601 Carlson Pwy
Suite 950
Minnetonka, MN 55305
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Jean’s Journal – May 2018  Keep your Eye on the Ball Or welcome to the Money Doctor’s prescription for success

 

As we enter the season of summer sports –baseball, soccer and even tennis season – making sure we focus our attention on items of highest priority is an ongoing concern when constructing and managing your wealth. As your Money Doctor- some coaching is necessary.
 
First – prioritize your life. This is all about the health aspect – your mental, physical and spiritual health if deteriorating will lessen the meaning of any “material” wealth you accumulate. After 30 years of managing wealth for a variety of modestly or extremely affluent families, the phrase “money cannot buy happiness” resonates continually.  So here is the script you’ve heard before – invest in your health first.  I see those with good health enjoy life significantly more beyond the size of their bank account, even those with modest means. 

 
Second – understand your wealth is means to an end. As a counselor of wealth, I do hear feedback continually suggesting I am your money conscience advisor to cajole you to save more, pay off debt, manage risk/return goals. As your advisor, I do not want to take on the role of gate keeper but rather remind you of the goals and priorities you have expressed to me as your planner.  Paying attention to your money management and focusing on the “ball” will help us hit the ball well – less strike outs and more base hits. If you comment on your desire to be:
 

1.Debt free
2.Have the ability to retire earlier or have career flexibility as well as life flexibility
3.Have enough wealth so money anxiety is reduced
4.Provide for others or causes that are most important to you
 

If however your actions do not align with the goals, I have an obligation as your advisor to comment as such.  Costs, greed and taking our eyes off of the goal of the impact of our wealth – is very much the cause or purpose of our engagement.  Also worth noting – your goals of your wealth may change as you age.  Your goals at age 50 – i.e. accumulate as much as possible so that the three goals above are achieved – may reprioritize at age 80.  Harvard posted an interesting study on the advisor as your “Money Doctor”. In that role, I am also going to remind you of:
  
1.Concentration of stock risk
2. Investment bias or blind spots
3. Behavioral finance tendency to extrapolate from recent history to the future – Recency Bias is very large currently. (if US Stocks have provided the best returns in most recent past – why wouldn’t that continue?)

In the journal of finance at Harvard, it concluded after a review of the role of advisors -

“We should not forget, however, the central point of trust-mediated money management—that it enables investors to take risks, and earn returns, that they might otherwise not obtain. There are surely significant distortions in portfolio allocation that are inevitable when investors exhibit psychological biases. Despite these distortions, financial advice and money management represent an important service”

https://scholar.harvard.edu/files/shleifer/files/moneydoctors_journaloffinance.pdf


We attempt to provide these ways to assist you.

1. Clarify goals and reaffirm these with you regularly.
2. Discuss ways and means of improving the odds of outcomes in investing, debt and cash flow/tax management.
3. Interpret pros and cons so that your decision making process with your wealth is improved and you can “rest with your decisions” In some areas we will appear contrary to recency bias or momentum in the markets.
4. Investigate and provide analysis on risks, costs and limitations with investment strategies.
5. Prioritize actions needed that have the highest material impact to your wealth goals.
 
To truly embrace wealth management, we need to keep our eye on the ball and prescribe actions! Your role is to follow those prescriptions.

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