“People are not afraid of uncertainty, they are afraid of change.” The quote is from Joe Tye, CEO and Head Coach of Values Coach Inc.
I believe it is smart to minimize the variables in any question. People have enough trouble participating in simple things. Minimizing complexity without removing the essence of the situation is an art form. Work at the skill.
What can we learn from Joe’s idea?
Be cautious in respect to investment risk descriptions. Investment advisors traditionally equate volatility and risk. Volatility is a clone of uncertainty. According to Joe, people are not afraid of that. Why? Because it deals with the near term. One year results. Most investors have a very long time frame and while they may notice and react to short term results, they intuitively know things will likely work out.
Some will be wrong.
The change they are afraid of, and would address, is the change of lifestyle if the money at retirement is too little or unexpectedly runs out. That fear can be managed but it cannot be ignored. People must know about it and they must organize their affairs in the present to minimize the possibility.
There are three requirements:
An advisor can help you with the arithmetic and can help with the discipline needed to run a long plan. Do not overlook that value. The price of doing it yourself may well exceed the price of hiring help.
The advisor can only help you if they maintain the position that you do have things to fear and also provide ways to address that risk. An advisor that can talk you in off the ledge every now and then will likely keep you on a track that has hope.
Mistrust an advisor that makes the future look too comfortable. There are now and will continue to be demons out there.
Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact: email@example.com