The basic processes of human life include growth, differentiation, respiration, digestion, organization, metabolism, responsiveness, movements, and reproduction. All of these processes are interrelated. These processes continue for as long as the human being lives.
The financial services industry operates on the principle that human life is never static, fixed, or inflexible. The financial plan that a client establishes is the foundation of an iterative process that requires monitoring, evaluating, and adjusting as life changes over time.
Michelle Singletary is a reporter for the Washington Post. She specifically writes about personal finance matters. Recently Ms. Singletary recorded this family memory:
“On one family vacation to the beach, my sister slipped in a few feet of water. She had trouble standing and began screaming for help, fearing she might drown.
‘Just stand up,’ I yelled.
The water was literally just above her knees, but she couldn’t regain her balance because, as a non-swimmer, she felt helpless. By the time I reached her, she was hysterical.
She was never at risk of drowning. But it didn’t feel like that to her.”1
This story reflects two totally distinct viewpoints held by two different people at the exact same time, with two completely diverse experiences. Time is a key part of being alive. Time and history flow together. And yet, individual people sharing the same moments can still have widely divergent perspectives.
Consider the times we are living in. In this crazy period of human history independent financial professionals (IFPs) are attempting to guide all their individual and distinct clients. What are the characteristics that define these financial times?
- Geopolitical events. The war in Ukraine, tensions with China, etc.
- Supply chain disruption. COVID-related disruptions continue.
- Bank failures. Recent failures of California-based Silicon Valley Bank and New York-based Signature Bank.
- High inflation. In 2022, the average inflation rate (using CPI data) was 8.0 percent.2
- Higher interest rates. To beat back inflation the Federal Reserve adjusted the federal funds target rate by five percent from March 2022 to May 2023.3
- Stock Market volatility. The S&P was down 19.4 percent for 2022.4
Not all clients act sanely, responsibly, or pragmatically in these harried times.
Michelle Singletary reminisces about the iconic scene in the Frank Capra classic, It’s a Wonderful Life, when desperate folks made a run on the Bailey Bros. Building & Loan. She urges us to recall what George Bailey says to the bank customers crowded at the counter:
“Now, just remember that this thing isn’t as black as it appears.”
Singletary: “It’s not useful to tell folks not to panic when they fear their money is at risk. Much as it was with my sister, it’s hard to stay calm if you’ve lost your financial balance and worry you can’t stand up.”
Point: The period of history we are living in is rife with challenges for IFPs working diligently to guide their many and varied clients, especially when some of these clients feel they are losing their footing.
Process Means History
It is in the vicissitudinous stream of history that people have always found themselves. To successfully navigate their times and circumstances, people look for available and reliable solutions, safe harbors, and dependable processes.
History means process.
Conversely, as John Murray wrote in his Commentary on the Epistle to the Romans, “Process means history.”5
Process is defined as “Something going on; a series of actions or operations conducing to an end; phenomenon marked by gradual changes that lead toward a particular result.”6
In other words, a process takes place in time. In history. It was appointed for us to live now, in this time period, and the convergence of events and forces that we experience day-by-day require a meaningful and dynamic process for handling our whole lives, including our financial affairs.
Process Meets Principle
Process, to be fruitful, must be built on proven practices and principles. To achieve financial goals of security and sustainability, people have long followed these simple practices:
- Budgeting
- Saving
- Retirement planning
- Investing
- Insurance
In addition, successful achievement of financial goals is accomplished by adhering to time tested financial principles, such as these:
- Spend less than you earn.
- Pay yourself first by setting aside savings.
- Make proper use of tax deferral and tax-free opportunities.
- Maintain an emergency fund.
- Diversify the allocations of investable assets.
- Hold onto investments for the long term.
Point: Financial planning is a long-term process. Strategic goal setting, relying on timeless principles, and avoiding impulsive decisions are essential to a holistic approach to managing financial affairs. The elements of proper financial planning are as well-known as are the principles undergirding achievement of financial objectives.
Question: Then why do so many people fail to reach financial success?
Answer: Lack of leadership and coaching. Fundamentally, clients need someone to hold them accountable.
There are many reasons why people should solicit the assistance of an IFP, but none more important than the role of accountability. Clients need an IFP to look over their shoulders in order for them to act responsibly under changing circumstances.
When acting on their fears, clients will inevitably make their financial lives worse.
IFPs are Leaders
The IFP who maintains continuous close client contact will keep them mindful of their top financial goals. The IFP urges stubborn adherence to these goals when clients waffle and wiggle under overwhelmingly difficult financial news.
“One of the best paradoxes of leadership is a leader’s need to be both stubborn and open-minded. A leader must insist on sticking to the vision and stay on course to the destination. But a leader must be open-minded during the process.”—Simon Sinek
Notice, however, that in addition to staying focused on the original vision, the IFP is also the person skilled enough to know how to adjust the process by which the goals are to be achieved.
Leadership Is Needed When Stuff Happens
“Most people don’t like change. They revolt against it unless they can clearly see the advantage it brings. For that reason, when good leaders prepare to take action or make changes, they take people through a process to get them ready for it.”—John C. Maxwell
Clients live within the sweep of human history, and they also have their own individual and family stories. Like all stories, there are good and also difficult things that happen. The reality is that every story involves change. That is when the IFP is most needed. When changes occur in the client’s situation or in the economic, political, or regulatory environment, a very present and involved IFP is able to help the client to:
- Understand how the change(s) will impact financial goals.
- Develop emotional intelligence to accept new realities.
- Grasp the importance of making needed adjustments.
- Appreciate the urgency and take the actions that these important matters deserve.
- Take fresh stock of their income, expenses, and debt.
- Consolidate debt.
- Make modifications to current lifestyle in order to achieve a desired long-term lifestyle.
- Readjust asset allocations in light of changing risk-reward relationships.
- Confidently stay the course with certain investments and strategies, while steering away from others that once made sense but no longer do.
Point: Because history unfolds like a sheet in the wind—haphazard, and unpredictable—clients often have to make difficult decisions. Remember that in the movie, It’s a Wonderful Life, poor George Bailey had to use his honeymoon money to keep the savings and loan open. In these moments, there is great comfort in the helpful advice of an IFP.
Summary
The writer E.B. White noted the following: “The only sense that is common in the long run is the sense of change and we all instinctively avoid it.”
Independent financial professionals know that financial planning is a process, and process means history. Every client makes financial decisions in stages, through various phases of their lives, and these decisions require revisiting.
Since clients run the risk of acting wrongly out of fear, or acting too late because of indecision, they benefit greatly from the accountability and objectivity of a thoughtful IFP.
Sometimes we just need to hear another person tell us to “Just stand up.”
If you are an independent financial professional, will you be there when your client needs you to speak those words?
Footnotes:
- https://www.washingtonpost.com/business/2023/03/15/money-anxiety-financial-news/.
- https://www.usinflationcalculator.com/inflation/current-inflation-rates/.
- https://www.forbes.com/advisor/investing/fed-funds-rate-history/.
- https://money.usnews.com/investing/stock-market-news/will-the-stock-market-crash-again-risk-factors-to-watch.
- “The Epistle to the Romans,” by John Murray, Westminster Seminary Press, December 2022, ISBN: 9781955859035.
- https://www.merriam-webster.com/dictionary/process.
