August 1, 2018 • Ross Levin
I have to admit that I am one of those annoying people who believe everything can relate to financial planning. I am not Sherlock Holmes, trying to see connections and clues in subtle places, listening for dogs that don’t bark. No, the connections between life and financial planning are simply what I see in real time in a variety of contexts. I have spent a lot of time better trying to understand those connections. I recently read a book by a Harvard-trained M.D. who integrates Buddhism and psychotherapy. Little did I know the impact Advice Not Given by Mark Epstein would have on the work that I, and I am sure many of you, perform. When he writes about psychotherapy, “Being right is not the point of this profession. ... Being useful is,” I think about those clients who were less enamored of my wisdom than I was, and who ended up instead of listening to me making decisions that harmed them (though some could have conceivably turned out better by ignoring my advice!) When our ego gets in the way of our planning, no one is helped. The ego is self-serving and insatiable, yet it consistently rears its head in our profession. When we want clients to love us, we might be making them dependent on us. That provides short-term benefits but ultimately erodes the clients’ confidence in their own decisions. It’s more useful for us to guide clients through the uncertainty they will face and help them adjust to it, not assume we can always prevent it. We’re more useful when we make sure the right questions are being answered, not simply the questions we are most comfortable answering. This means we have to ask far more questions to get more information than clients would likely tell us on their own, at least if we are to work through the challenges in front of them. One of the questions we ask clients when they bring something up is, “Do you want our advice or our support?” Some clients are going to deviate from our models and make choices that are, according to our models, suboptimal. But models are not maps; if the clients ignore the advice, it doesn’t mean things won’t work out for them. If clients are going to do something anyway, we should try to help them through it with the least amount of damage. If they really want our advice, then we can help them talk themselves out of something with the appropriate questions. That way they can reach a conclusion that may help them do something else. For example, there is almost no good financial reason for most people to belong to a country club. But the decision to join one is not about finances—it’s about the life the clients imagine for themselves and their assessment of the long-term utility of it. They will likely be wrong about those assessments. Almost all of our clients who are club members eventually reach the point where they are staying solely because of sunk costs and the concern about what they could be giving up if they left. We may call it the endowment effect; they may call it “fear of missing out.” Regardless, it is suboptimal. Are we better off showing the clients why they should quit the club or helping them feel OK about staying? It probably depends on how high the stakes are and how important it is for them to make an “optimal” decision in the first place. Do they want advice or support? Another way we can help clients is by helping them understand what we know for sure and what we don’t know at all. Epstein writes, “The first day of school and the first day in an assisted-living facility are remarkably similar. Separation and loss touch everyone.” We know for sure that life will change but we really don’t know at all when or how it will do so. One of our clients nursed his wife for 10 years through Alzheimer’s and often said that he would not allow that to happen to him. Then he started exhibiting the disease and couldn’t admit it to himself. We recently worked with his children to help find him a home in which he could live out his later years in a way similar to his wife’s, but without a spouse to care for him. The children are having to go through a similar loss twice. First « 1 2 3 » Next
I have to admit that I am one of those annoying people who believe everything can relate to financial planning. I am not Sherlock Holmes, trying to see connections and clues in subtle places, listening for dogs that don’t bark. No, the connections between life and financial planning are simply what I see in real time in a variety of contexts. I have spent a lot of time better trying to understand those connections.
I recently read a book by a Harvard-trained M.D. who integrates Buddhism and psychotherapy. Little did I know the impact Advice Not Given by Mark Epstein would have on the work that I, and I am sure many of you, perform.
When he writes about psychotherapy, “Being right is not the point of this profession. ... Being useful is,” I think about those clients who were less enamored of my wisdom than I was, and who ended up instead of listening to me making decisions that harmed them (though some could have conceivably turned out better by ignoring my advice!) When our ego gets in the way of our planning, no one is helped. The ego is self-serving and insatiable, yet it consistently rears its head in our profession. When we want clients to love us, we might be making them dependent on us. That provides short-term benefits but ultimately erodes the clients’ confidence in their own decisions.
It’s more useful for us to guide clients through the uncertainty they will face and help them adjust to it, not assume we can always prevent it. We’re more useful when we make sure the right questions are being answered, not simply the questions we are most comfortable answering. This means we have to ask far more questions to get more information than clients would likely tell us on their own, at least if we are to work through the challenges in front of them.
One of the questions we ask clients when they bring something up is, “Do you want our advice or our support?” Some clients are going to deviate from our models and make choices that are, according to our models, suboptimal. But models are not maps; if the clients ignore the advice, it doesn’t mean things won’t work out for them. If clients are going to do something anyway, we should try to help them through it with the least amount of damage. If they really want our advice, then we can help them talk themselves out of something with the appropriate questions. That way they can reach a conclusion that may help them do something else.
For example, there is almost no good financial reason for most people to belong to a country club. But the decision to join one is not about finances—it’s about the life the clients imagine for themselves and their assessment of the long-term utility of it. They will likely be wrong about those assessments. Almost all of our clients who are club members eventually reach the point where they are staying solely because of sunk costs and the concern about what they could be giving up if they left. We may call it the endowment effect; they may call it “fear of missing out.” Regardless, it is suboptimal.
Are we better off showing the clients why they should quit the club or helping them feel OK about staying? It probably depends on how high the stakes are and how important it is for them to make an “optimal” decision in the first place. Do they want advice or support?
Another way we can help clients is by helping them understand what we know for sure and what we don’t know at all. Epstein writes, “The first day of school and the first day in an assisted-living facility are remarkably similar. Separation and loss touch everyone.”
We know for sure that life will change but we really don’t know at all when or how it will do so. One of our clients nursed his wife for 10 years through Alzheimer’s and often said that he would not allow that to happen to him. Then he started exhibiting the disease and couldn’t admit it to himself. We recently worked with his children to help find him a home in which he could live out his later years in a way similar to his wife’s, but without a spouse to care for him. The children are having to go through a similar loss twice.
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