Elegant is an adjective that means
- Pleasingly graceful and stylish in appearance or manner.
- (In Mathematics and science) a proof that is pleasingly ingenious, simple, clear and offering insight into why it is true.
Elegant should apply equally to financial plans. How much easier would they be to explain and maintain if if they were simple, clear and offering insight into why they work. In this context, ingenious is more a matter of implementation.
I happened on some writings of Edsger W. Dijkstra recently. He was a pioneer in computer software architecture. Outspoken, brilliant and insightful, many of his thoughts regarding software development apply to other complex structures like financial planning. Try these on for size:
- “Simplicity is a great virtue but it requires hard work to achieve it and education to appreciate it. And to make matters worse: complexity sells better.” How true is that. How many plans are meant to impress rather than enlighten?
- “Simplicity is prerequisite for reliability.” It is hard enough to keep simple things working. Reliable complex systems are rare. Why create them?
- “The problems of the real world are primarily those you are left with when you refuse to apply their effective solutions.” Many solutions are distasteful. Saving money today reduces lifestyle today. Failing to save, with certainty, means reduced future lifestyle. Life insurance feels like betting against the home team. Adhering to a budget is restrictive.
- “Program testing can be used to show the presence of bugs, but never to show their absence!” The external world is highly complex and so your financial plan will not encompass all the possibilities. You can test within your plan but you cannot test externally. Build in shock absorbers. Do not be too comfortable with the idea of the government doing stress tests on banks and other institutions. You can find problems but not finding them does not prove that none are there.
- “Elegance is not a dispensable luxury but a quality that decides between success and failure.” I think I will print that one and put it on the wall above my computer screen. If we know complexity induces failure, would we be inclined to overlook it.
Financial plans matter. They will not guarantee a successful life any more than refusing to drink excessively will guarantee a successful life. They are defensive. The failure to have an adequate plan nearly guarantees failure.
Having an easy to understand, intuitive plan should be a primary goal of every person. Delivering same should be the primary goal of every advisor.
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