May 2022
A monthly newsletter of the best behavioural resources from around the web. Enter your details below to start receiving our regular updates.
2022 rolls on as the most challenging year we've faced in some time. Remaining stoic with client families during these times is what we've been sent into the world to do. The great advisers stand tall during market extremes. Our principles and practices become even more significant in depressed times. It will always be the case that we correctly set up our client's investment portfolios on day one, then spend the rest of our days ensuring they stick to the portfolio we set up. It sounds pathetically easy, but as we all know it's incredibly difficult in practice. Without our help clients are constantly getting in their own way.
Enjoy this month's newsletter. As always, it's packed with content and links we hope you find interesting.
Above The Clouds
My favourite television show of all time is Mad Men. Where do I start with this masterpiece? I love its journey through the 20th century, the business stories, the characters, and the plot lines. But most of all I love the lead protagonist, Don Draper, and his eclectic personality.
I’ve watched the series three times now - I’m sure I’ll be watching it again someday soon! In a recent episode I watched, Don was being flown to a business meeting by a colleague, Ted, who was a keen amateur pilot. They took off from New York and were destined for Detroit. It was a rough Winter's day. The old rickety plane just about left the runway, smoke billowing out the back, and Don's expression was pure terror. Ted's face screamed focus.
Up they went through the dreary rain and gusting wind. A few minutes passed and Don was becoming more and more concerned about Ted's ability to navigate them through the blizzard. Ted kept repeating ‘just a couple more minutes, just a couple more.’
Suddenly they broke through the clouds and instantly the plane calmed. The noise stopped, the rain disappeared, and they were clear. A perfect Summer's day.
All experienced pilots know that whatever the weather below the clouds, once you break clear of the clouds you’re in blissful sunshine. The trick is to stay calm in the blizzard until you break clear.
Successful long-term investors also need to breach the “clouds” in order to be successful and beat the odds. The odds are that most investors underperform the markets, and also under-perform the actual investment funds they are invested in. They do this through market timing, chasing winners, and a whole host of other financial misbehaviour.
One of our jobs as professional advisers is to help our clients invest above the clouds. Below the clouds is financial darkness: the financial commentators, hot funds, hot sectors, catastrophists, and the latest thing which is "working now". Financial trash that has been dreamt up by a marketing department to make themselves rich. All a distraction to the real goal.
Global equity funds are an absolute wonder. They will produce the bulk of the wealth for your clients and also for you and your family. The compounded returns will provide staggering returns over time if you just leave them alone and get out of the way.
As Charlie Munger says: “The first rule of compounding is to never interrupt it unnecessarily.”
Financial plans and financial futures are destroyed below the clouds. How many more client families can you get to live their financial lives above the clouds?
We are approaching 5 months of this latest market cycle from the S&P 500 high on Jan 3rd 2022. Let’s hope we can ‘book’ another official bear market for the world’s premier index. Another -19% (the current drawdown achieved a few days ago) is a little frustrating.
All rather rudimentary I know. We know the markets will do this. We tell our clients they will, so when they do we need not be surprised. Weather reporters don’t fear reporting hurricanes - we should not fear reporting declining markets. They are a feature and not a bug.
Continue to give your clients the unvarnished truth about the investment markets, nothing more and nothing less. Our battle cry remains: ‘Stick to the plan!’.
📰 Articles & Blogs
How Human Financial Advisors Provide Value That Robos Cannot [18 minutes]. Focus on the areas where human support is most valued.
Heads, Hearts, and Wallets [6 minutes]. When it comes to financial stress, the body keeps the score.
We All Knew This Would Happen [4 minutes]. Why do people do these crazy things even when they know better?
The Triple Whammy of Advisory Business [4 minutes]. It's always the result of an inability to make other hard choices.
The Biggest Mistake an Investor Can Make [3 minutes]. You can't have one without the other.
A Stock is Not an Index [5 minutes]. There is no guarantee that the individual company will ever recover.
The case for (always) staying invested [4 minutes]. A great resource during good and bad times.
🎧 Podcasts
How To Ask Better Questions [53 minutes]. A distillation of learnings from 250 podcast interviews.
📚 Book Recommendations
The World For Sale by Javier Blas. Fascinating insights about the hard-knuckle and secretive world of commodity trading.
👏 Encore
Do Free Financial Plans Reduce The Value Of Ongoing Advice? [19 minutes]
Why a small candy company is Warren Buffett’s ‘dream’ investment [8 minutes]
How to become a better listener, according to science [4 minutes]
The Fees Race to the Bottom Can't be Won [3 minutes]
