The most memorable scene in When Harry Met Sally was in the diner. Meg Ryan explains that men cannot tell the difference between a fake and real orgasm and then proceeds to prove her point. At the scene’s climax, an elderly patron looks at the waitress and says, “I’ll have what she’s having.”

This memorable bit should stick with us for a couple of different reasons:

No. 1, it can be difficult to determine what is fake and what is real; and no. 2, we often want what others have.

Deconstructing both of these points will illuminate something about financial planning as well.

When we try to determine what is fake and what is real, we’re biased by our own personal histories. None of us are objective. And that influences the decisions we make for ourselves and for clients.

Since we live in a complex, adaptive world, little is certain. When we run scenarios for clients, they aren’t predictions, but rather a variety of choices we develop and test. We use our own background to establish those scenarios. Clients have their biases, too, which are layered on our own.

Our firm has a client with a significant amount of low basis stock from the Fortune 200 company he left. Our expertise tells us to diversify his assets, yet any effort to do so would certainly generate taxes, which he and his wife don’t like paying. The benefits of the diversification, meanwhile, are not as clear to him as the punishment.

The couple also have what most of us would call an irrational belief that they need to contain their lifestyle only to what’s provided by the dividends paid from their holdings. This strategy has left them living off less than 2% of their total portfolio. So even though they are rich, they feel poor.

Our firm sees things differently. We happen to use a dynamic spending policy based on life expectancy, legacy and asset allocation.

So to make the couple feel at ease, we developed a strategy for them where we carved off enough of their stock to pay for their desired lifestyle and kept the rest of it to be used for gifting and anything else they wanted. We assured them that if the stock went to zero, they would not have to make lifestyle adjustments. In essence, we blended our bias around a spending policy with their bias around taxes and dividends.

So what is fake and what is real about this plan? Could it be both fake and real?

The couple’s sense of being poor was certainly real to them, yet it would be hard to consider someone with a few million dollars being poor. So the facts made it seem fake, while their feelings made it real. Now consider what would happen if these clients went to a billionaire event. Their millions would be a pittance next to what their cohorts have. Would their feelings of poverty be more real then?

Perhaps virtually everything is fake and real, it just matters to what degree. We are so used to turning things into binary choices that we don’t leave room for the unlimited number of other possible outcomes in any scenario. We also may not consider our own limited experiences or our clients’ limitations. We misjudge our abilities, basing them on ridiculously small sample sizes.

I have had the same business partner for 31 years and the same wife for 35. Does that mean I am particularly good at partnering? Maybe it means that I have a huge belief in commitment that happens to match the beliefs of those I’m committed to. Maybe it means I got lucky twice in a row. Maybe it means I had a good, albeit unstated, process for making big decisions. But whatever story I construct for these successful outcomes, it will be both fake and real.

If everything is both, then we need to be sure we are able to adapt as conditions change. It is one of the reasons I hate making irrevocable financial planning decisions. We are often best off making the smallest change we can rather than the biggest. We recently had someone come in whose partner passed away. She was left in a financially challenging situation—with arguably too much real estate, too few liquid assets and a cash flow that would be difficult to manage if things remained as they were.

But things usually don’t remain as they are. There are many possible things that could happen to change the course of this client’s life, and this is the worst possible time to be making big decisions. Her dire situation is partly real and partly fake. In truth, she doesn’t have to do anything for a while, at least until she readjusts to the reality of her new life. Her perception will change over time. While taking action may temporarily make her feel more comfortable, it also may lead to future regret. If we reinforce her anxiety by making her focus on our spending policy work, that’s not good planning. A better approach is to work through what decisions are best delayed and made once the fog gets lifted. A safe spending policy is more real than fake, but it is not real.

The tension between real and unreal carries into the second problem—wanting what others have. We may say the goal of financial planning is security or legacy or making our actions and values congruent, but ultimately the goal is helping people want what they have. Clients who always want more are never settled. Clients who compare themselves to others will never have or be enough.

Psychologist and author James Hollis believes we spend the first half of our lives focused on social concerns—knowing how we fit in—and the second half figuring out spiritual matters—why we are here. I believe that integrating these two pieces is an important part of the work that we do as financial advisors. Knowing how we fit in and why we are here do not need to be discrete areas of inquiry. They should not be opposed to each other.

How do we help clients relate to both questions? One essential way is by helping them want what they already have. We often talk about how much longer experiences last than material things do, but what does that mean?

One of our clients is a car nut. For him, buying and driving a great car is an experience. But our other clients see cars as status symbols. If we can understand the clients’ motives, we are better able to direct them to decisions that will help them want what they have.

Understanding the social part of their lives is relatively easy; understanding the spiritual part is more difficult. To me it means clients would see past their own interests and serve others. This doesn’t necessarily mean they have to develop a philanthropy strategy so much as it means they should understand their values and how these are represented by their behavior. We use “Motivational Values Cards” from the philanthropic advisory firm 21/64 (www.2164.net) to help clients understand the values that are most and least important to them. Using this exercise, we can help our clients develop a personal values statement, and after that a personal philanthropic or mission statement. But values are relational—they help us develop either a deepening relationship with others or with ourselves.

One of the things that I noticed in myself is that I felt sensitive about being taken advantage of. After reading a New York Times opinion piece by the pope, I developed an understanding of how little that attitude served me. The pope was writing about panhandlers and said, “Give without worry. If a glass of wine is the only happiness [the panhandler] has in life, that’s OK.” I realized that I was often looking away from these people or constructing stories about how they were part of a syndicate or that they could find work if they really wanted to. But those stories were about me and my concern about being taken advantage of.

The pope also believes that you shouldn’t just give but look the person in the eye and touch his or her hands. I started asking people their names, shaking their hands and introducing myself. This simple act has changed my life. Not only did it help me not worry about being taken advantage of, it has addressed some of the challenges that I had about money as power and better helped me see everyone as human in our world of shared humanity. Surprisingly, this also made me less nervous about interacting with those I perceived as having more than I do. By inadvertently looking down at others, I must have unconsciously felt that others could be looking down at me.

It’s been years since I last saw When Harry Met Sally, and my takeaways from the movie are far different than they were at the time. I never would have guessed how much help Meg Ryan would be for my financial planning.     

 

Ross Levin, CFP, is the founder and chief executive officer of Accredited Investors in Edina, Minn.