"The best-laid plans of mice and men often go awry."
After destroying the home of a mouse while plowing his field, poet Robert Burns used this line to express his regret and to suggest that no plan is fool proof. Inspired by these words, John Steinbeck titled his classic Depression-era novel Of Mice and Men. Today, many investors are feeling a similar regret as they observe the turmoil that's impacted their financial lives.
Property and investment portfolio values have declined. Unemployment is rising. The short-term prospects for the economy are cloudy. Even wise investors, who had taken the time to construct comprehensive financial plans, are being forced to reevaluate those plans and assumptions. The financial media is buzzing with talk of the next great Depression. Are we in one already? How do we help ourselves and our clients make sense of it all? What is our role as financial advisors? Does green investing play a part in any of this? Several recurring themes from Steinbeck's novel provide interesting parallels to the current market environment, green investing and our role as transformational advisors.
Nature And The Mustard Seed
"They seed the earth, or they haul in the crop, and then they move on, never establishing a connection with the cycles of the natural world." This excerpt from Steinbeck's novel describes the plight of migrant farm workers during the Great Depression. There's an odd parallel between these workers and today's investors. The migrant workers went from farm to farm and rarely had anyone to look to for companionship and protection.
In today's market environment, because the downturn has been so dramatic and prolonged, it's easy to see how investors can feel disconnected from the cycles of the economy and the stock market. Some lost their connection due to a lack of understanding and/or respect for the natural cycles of business. Others were complicit in allowing things to get out of hand when they knew that something wasn't right. So how do we help our clients gain their bearings and begin to reconnect with their goals and dreams? Perhaps we can take, and share, some solace in the following words: "The kingdom of heaven is like to a grain of mustard seed, which a man took, and sowed in his field: Which indeed is the least of all seeds: but when it is grown, it is the greatest among herbs, and becometh a tree, so that the birds of the air come and lodge in the branches thereof." Taken from the bible, this excerpt has roots in most major religions and cultures. It relates a promise of hope. Communicating hope to our clients is the first mustard seed in helping them reconnect.
In Steinbeck's novel, financial capital was scarce for many of the characters. This lack of capital kept them from realizing their dreams because every day became a struggle to survive. Financial capital is the lifeblood of our society. We use money as a means to provide the necessities of life to meet our needs both today and at some time in the future.
In the current market environment, many investors are questioning whether they've accumulated enough money to fund a retirement that will serve to meet their basic needs. For those in retirement, whose financial capital is not sufficient to meet their current and future income needs, real planning needs to be done. Advisors and clients need to evaluate and agree upon realistic expectations and assumptions on how clients can be best positioned to meet their financial needs. For some, these will be difficult decisions. For those yet to retire, they should take solace in the fact that financial markets are cyclical and that the current economic and financial environment is providing unprecedented opportunities to fund future needs at very reasonable prices. Combining this reality with the steps being taken to strengthen our financial system, we begin to see a second mustard seed taking root. With increasing life expectancies, even if financial assets continue their decline in the short run, most pre-retirees should be planning on investment time horizons of at least 30 years after they reach retirement.
While our financial markets have given us a wake-up call, our planet is experiencing some pain as well. The balance of natural capital has been altered. There are an increasing number of signals that the natural resources that sustain us and our planet are under duress. The challenges with clean water and clean air serve as a reminder that the cycles of the natural world need to be understood and respected as well. Green investing has surfaced as a mustard seed. It was planted in the soil over 30 years ago and has been nurtured by capitalists who have a deep respect for the cycles of business and nature.
These capitalists possess a sense of stewardship. They understand and value the regenerative power of nature and conscious capitalism. Some people dispute the negative impact of individuals and organizations that act without a conscious regard for environmental, social and governance (ESG) issues. Some contend that, even though these challenges may be real, free-market capitalism will provide the solutions. While it's beyond the scope of this article to cite or defend the studies supporting these points of view, I encourage all of us to be open-minded and collegial as we work together to reconcile our differences and solve these challenges. Our willingness to acknowledge the cycles of nature, as well as the cycles of business and the financial markets, will serve us and our clients well.
There is a recurring theme in Steinbeck's novel. The men in his story exhibit a desire to be like brothers to one another. They want to live with one another's best interest in mind and to know that there is someone in the world who is there to protect them. Today's financial advisor needs to embrace this theme. The mustard seed is your fiduciary responsibility to act in the best interests of your clients. In 1938, Steinbeck wrote the following in one of his journal essays: "Try to understand men, if you understand each other you will be kind to each other. Knowing a man well never leads to hate and nearly always leads to love."
Faith, Hope And Love
In his new book, Behavioral Investment Counseling, Nick Murray offers some wonderful advice. His mantra of "faith in the future" will fortify your work. Faith should be the foundation of your financial planning efforts. Instill hope in your clients. Demonstrate your faith and hope by patiently letting portfolios do what they have been designed to do. Several years ago, Nick published an audio tape series that served as a complement to his classic book The Excellent Investment Advisor. The series was entitled You Are What You Do. As transformational advisors, try to understand your clients. Help them uncover their dreams and goals. Be their mustard seed of hope that always leads to love. Love is what you do for your clients. Now is the time for doing.
James Buro, CFA, CFP, ChFC, CPA, is president of Conscious Capital. He provides consulting, training and coaching services to support the marketing and communications activities of financial services companies and advisors who seek to better understand and serve the conscious capitalists.