Traditional conversations about risk tolerance generally focus on clients’ retirement goals and related investments. Since it’s always a subjective topic, there’s never a perfect answer. Ultimately, the amount of risk one takes depends on a number of factors including knowledge, experience, goals, and feelings––i.e. how much can they stomach to lose?   

The concept of “risk” and its principles also apply to those of us in the role of advisor. Not how advisors select and manage their own investments but, instead, how they may need to adjust their personal risk tolerance before hazarding a major undertaking such as finally writing that book or developing a new portfolio rebalancing process or getting approval to implement a strategy to connect more deeply with prospects and clients. 

While my focus is generally on how to work with clients in various retirement situations, I find summer the perfect time to work on myself and, thus, advisors like me. I often take on a new project, or exercise my creativity during the summer since my clients require less of me at this time of year.

I’m also touching on the topic of “adjusting personal risk tolerance” because of conversations I have been having with other advisors. A growing number of advisors are telling me they aren’t where they want to be, want to try something different such as changing their conversations with clients or adding a fresh or unique perspective to their investment overview. Undoubtedly, clients, individual practices, and our industry are starved for new and innovative ideas, making now the perfect time to move forward with them. 

So what is it?  What’s your big idea that you’ve been holding on to and that’s been in your head or on scratch paper in your drawer? How will it benefit others? What makes it special and unique?  

Regardless of whether it’s your first year in the business or you’re a silver-haired veteran, everyone has prospects who want a 10 percent return without losing a dime. And so we walk clients through the relationship between risk and return: No risk, no return, right? The same holds true for that big idea you have.  You can’t impact a client’s life, another advisor’s career, or an entire industry if you don’t roll the dice. You have to move from capital preservation mode (I don’t want lose anything, be judged or possibly fail) to aggressive growth mode (swing for the fences).

First and foremost, I think it’s important to talk about the downside of getting out of your comfort zone.  Just as we warn clients that down markets are just as much a part of investing as up markets, the reality is, losses seem to hurt more. One of my core areas of expertise is learning the hard way.  Literally, I have messed up so many times, in so many ways, that it’s actually become an asset because I’ve learned how to tolerate complete and total losses; to trust my instincts; and to care less about what others think:  A contrarian view, if you will.

I once created a software program that helped people budget and manage their cash flow based on their personal beliefs and values, instead of mere dollars and cents. It prioritizes their spending and saving habits based on what’s important to them. Unfortunately, after three years of pain, expense and time consuming work, I realized that broke people don’t want help––or at least to pay for it––and that advisors can’t make a living helping penniless people who don’t want help. So it was a total bust on my balance sheet, but a blessing in knowledge and experience gained, which are two key factors in any kind of risk tolerance scenario. 

I also recall my first published article. I sent it off for approval, naturally thinking it’s only a matter of time before I’m on the NY Times bestseller list and wondering what would be a witty opening line to my Pulitzer Prize acceptance speech. But, of course, that wasn’t exactly what transpired.  The article I gave birth to came back with one, maybe two, of my original sentences intact. It was disheartening and felt like someone punched me, creating an emotional state that made me question my desire to continue down that path.

Just as the dot.com crash and great recession humbled many investors, failure, letdowns, and setbacks will be part of the process, and those stumbling blocks should help shape your personal risk tolerance. You won’t please everyone, and it’s inevitable that some won’t even like your idea. But just as we teach our clients about the need to diversify and ride out things, you may need to try different ways to make your idea happen, and commit to the long haul. There will be bumps in the road.  Volatility may make you want to get off the rollercoaster. But, as we preach to our clients, staying the course and avoiding emotional decisions will pay dividends.  

It reminds me of the story of the basketball coach who needed to motivate his players to persevere through the remainder of the season: 

He asked his team, "Did Michael Jordan ever quit?"

The team responded, "No!"

"Did UCLA’s great John Wooden ever throw in the towel?" he yelled.

"No!" hollered back the team.

"Did Kobe Bryant ever quit halfway through the season?"

Again, the team shouted, "No!"

"Did Seymour McDunn ever quit?"

The players were suddenly silent.  They looked at each other and, finally, somebody asked, "Who's Seymour McDunn? We’ve never heard of him." The coach snapped back, "Of course you never heard of him … he quit!"

Wanting to quit or feeling uncomfortable is just part of confronting risk.  Not giving in will help strengthen your ability to take setbacks in stride.  At such times it’s best to take your own investment advice:  don’t make emotional investment decisions, and stay the course.

Being conscious of the downside of risk taking shouldn’t scare you away from taking action. It should, in fact, help you set realistic expectation for publishing that book, developing that new investment approach, or changing the way you interact with clients. I love using quotes from Warren Buffet, Peter Lynch, and Jack Bogle to help clients understand what they are getting into when they invest.    Among my favorites is Bogle saying, "If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks."

The same can hold true for bringing a bright idea to fruition.  Buffet is credited as saying, “Someone's sitting in the shade today because someone planted a tree a long time ago,” and Lynch said, “It would be wonderful if we could avoid the setbacks with timely exits, but nobody has figured out how to predict them.”

So start planting your idea and don’t worry about any setbacks.

One of my business mantras is “Avoid being cliché.” It helps me open up new and creative ideas.  Recently, I decided to unleash my own creative efforts by creating a video trailer about my Naked Retirement workshop. I got the idea during a church service where they used a fascinating video retelling the story of Adam and Eve. Now I’ve heard the story a million times but this video brought it to life for me like never before. Then I realized I had the same opportunity to give my workshop some new life. I had never seen advisors using video trailers to promo their workshops so I took the time and energy to create one.

What was great about this project––and the primary reason I’m encouraging you to pursue your big idea now rather than later––is the response I received from it. Whenever an advisor, client, or audience member walks up to me, or emails me, and says, “Thank you,” or “I never thought about retirement (or my career) that way” it’s a major return on my investment and worth every bit of risk it required.

P.S.  Don’t be shy, let me know about the big idea you’re ready to make happen by leaving a comment or e-mailing me. Also, check out my other articles at FA here as well as my most recent Naked Retirement Webinar. Follow Robert Laura on Twitter @robertlaura. He is the president of SYNEGOS Financial group, co-founder of RetirementProject.org, and author of Naked Retirement. He can be reached at [email protected].