One of the real delights of having a kid in college is the terrific books they bring home. Much as I lament the lack of survey courses, and the fact that students can get out of college almost completely ignorant of the Western Canon (don’t stone me), some profs manage to force them to read haunting, thoughtful pieces that will follow them through life.
Recently, dearest daughter brought home The Spirit Catches You and You Fall Down. a study of the terrible collision between Western medicine and a Hmong refugee family over the treatment of their severely epileptic child. Anne Fadiman, the author, knows a thing or two about writing—she won a National Book Critics Circle Award for the book, and she probably imbibed literature with her pablum, her father being Clifton Fadiman, the famous editor and author of the Lifetime Reading Plan. (Footnote: we used his wonderful book as a guide while homeschooling, so DD did get some smidgen of aforesaid Canon).
Spirit is so thought provoking and spellbinding that not only did it keep me up nights but two weeks after finishing it I’m still thinking about it every day. I’m not giving away anything to say that it’s all a horrific train wreck. If you’ve ever had experience with serious illness, you will find yourself identifying mightily with the Hmong family, and if you’ve ever dealt with annoying clients or even a recalcitrant child, you’ll feel for the doctors, too.
One of the most interesting questions the book raises is oh-so-relevant for financial planning—is perfect compliance with a plan necessary? or is there some lesser change that would work nearly as well? Is the correct answer always the one justified by numbers (and science) or are our beliefs and feelings (aka behavioral finance) just as compelling and important? Is there any middle way?
No, yes, no, yes, yes. We financial planners like the certainty and precision of numbers, so much so that we even believe them ourselves. If our projections say your money will last your lifetime, and you can spend exactly $84,237 per year (pick a number), we breathe a sigh of relief, print out the report, have a reassuring client meeting, and off you go. But change the assumptions, the conditions, or the faith of the people involved, and maybe the medicine doesn’t work quite so precisely. It’s critically important to recognize that the best prescription is dependent on certain conditions, but must be tweaked for individual circumstances, personality, and life situation.
Of course, the best plan won’t work if you don’t carry it out. But as Lia’s doctors found out, the plan won’t work if your beliefs, abilities, and commitment disrupt it. I see this so often when people come to me with some robo-advice that proves they can never retire or afford college for their children. Faced with the model that says they must save umpteen thousand dollars, they get terrified and give up (and don’t take the medicine). But even less than perfect action can be life-saving. If you have only managed to save $20,000, or $10,000, or $5,000 (instead of $250,000) for college, more power to you! Believe me, you won’t be sorry to have it.
Other perennial questions—should I pay off the house or invest the money? Should I take the lump sum or the pension?—depend as much on what will bring you peace of mind as on what the numbers might indicate. These are questions that must be sorted through with an advisor who tries to get to know you, not just someone who will crunch numbers.
If you leave an advisor’s office (including mine) with a plan for investments and it turns out to require changes that you put off, and put off, and put off…then maybe the plan, while excellent, is simply not the right design for you. Moving in the right direction is better than doing nothing at all, and revisions should be made until you feel confident that you can proceed.
One of the horrible truths the book demonstrates is that not speaking the language can result in devastating and costly consequences. In financial planning, too, advisors and the industry can speak a foreign and fatally confusing language. Witness the firestorm over fiduciary, which is a difficult word meaning only that the advisor must act in the client’s best interest. Why on earth would this be controversial, and why would the brokerage industry be conducting a bombing campaign to scare the individual investor into believing that this is somehow an evil requirement cooked up by the Obama administration? Because their bull (er, ox) might be gored and they might not be able to make usurious profits on the backs of people whose lack of industry comprehension they exploit. Or the confusion over fee-based (brokerage jargon that means we’ll collect a commission and charge you) vs. fee-only (which means we’ll charge you by the hour or based on assets managed). Fee-based is a subterfuge to confuse you and make you think you’re getting a better, and honest, deal. The brokerage industry is counting on the fact that most people won’t understand the difference, and that they’ll look like they’re wearing the white hats, too. They’re not.
If you don’t understand what an advisor is saying, how that advisor is being paid, why they are recommending what they are, and how they arrived at those conclusions, don’t stop until you do. Even the best doctors make mistakes, and learn from them, but patient, and client, input can have better outcomes if the plan fits well. And sometimes the questioning can produce a thoughtful change in tactics, one which might save the future.