June 1, 2018 • Ross Levin
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. First « 1 2 3 » Next
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.
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