Apply Sutton’s Law With Every Client


Willie Sutton was a bank robber who spent more than half his adult life in prison. Despite his unenviable career, he had good ideas that translate into other realms.

One of his famous ideas was an answer to a reporter’s question, “Why do you rob banks?”

Sutton, “Because that’s where the money is.”

The idea in that has become known as Sutton’s Law and it is taught to medical students. Look for the obvious first. If that doesn’t solve it, then look further. This process minimizes the cost of diagnosis. You don’t start with expensive tests that eliminate some one in a million chance.

It is the exact opposite of Finagle’s Fourth Law. “Never make anything simple if you can make it complicated and beautiful.”

When we first got our pug, he would howl and make a fuss with his head. After a couple of days of that, we went to a vet that had been recommended. She looked at her medical books and decided it was some exotic brain issue and they would need to do some tests. I looked at my check book and decided it was something else. A pug forum supplied the answer in minutes. Pugs have a wrinkle and if it is not clean enough it gets itchy. New vet.

As one doctor has said, “When you hear hoofbeats behind you, assume it is a horse and not a zebra.”

Good advice for financial planners and for the people they advise. Don’t look for the complicated way until you find the simple way does not work.

Insurance works. Worry about the kind after you have the coverage dealt with.

Saving works. If you don’t save enough, it will take spectacular management to overcome a lack of capital.

Having a plan with priorities and a time frame works. It will help you because you won’t need to ask whether some apparent opportunity is good for you. It will fit or it will not. Planning helps you sort out the important from the trivia.

As an adviser, when you do start applying yourself to solving the problems, be sure to use the right tools. Willie Sutton carried a machine gun that he later claimed was not loaded, but its effect on the bank employees was likely profound.

Willie’s second law. “You can’t rob a bank on charm and personality.”

So it is with financial planners. Financial plans do not appear with a smile and a clap on the back. Advisers need command of the tools of their trade. Professional development, reading and sharing with others in the business will make your more efficient. Clients like efficient. It costs less in the long run than dealing with amateurs, well meaning as they may be.

Financial planning services are needed and reliable practitioners can add great value.

Bank robbers are not the ideal role model, but you need to be alert for ideas that work no matter from whom. Pay attention. Learn what you can, where you can.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

Monuments and Heirlooms


Many people have assets that are treasured by the family. These can include a farm handed down through many generations, a business carefully created, a cottage, painting, a piece of jewelry, an antique or art. Some of these assets are liabilities.

In simple terms, a monument or heirloom is a nominally valuable asset with an emotional inclination to keep it.

The “Monument – Heirloom” designation creates problems.

  1. If the asset appreciates in nominal value, income taxes are due every time it changes hands.
  2. The asset is not a “good asset” for the eventual owner because a sale or using it as security for a loan is not a realistic option.
  3. The other heirs or their families often look at the asset’s value as if it were going to be sold. That misrepresents things and can cause hard feelings.

Consider this extreme case.

You have one sibling. Your parents have two assets. A diamond worth $1,000,000 that has been in the family for 250 years. Great misfortune will befall, with certainty, anyone who sells it. The other asset is a bank account with $10,000 in it. As your share of the estate, you may choose which of the two you want.

If you take the $10,000 asset, you may do with it as you choose. If you take the $1,000,000 asset, you will be faced with insurance and security costs each year and must set aside money to meet the eventual tax liability when you transfer it to your heirs. These costs will come out of your other income or assets.

The diamond is not an asset within any meaningful definition of the word. It consumes rather than builds cash flow or useful value. By any view, it is a liability.

Except as an exercise of filial duty, no one would choose to own it under these conditions.

The difference between this example and a family farm or cottage is only one of detail.

When transferring assets that have emotional strings attached, value them at a price that is representative of their value in use rather than their value in exchange. Be sure everyone with an interest knows the rules.

And don’t forget to provide funding for the taxes that will become due. Also from your other assets.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

Reversability Is A Dimension Of Risk


No action is risky if you can reverse it for little or no cost.

People often confuse complexity and the size of the transaction with risk. At the same time, they believe that simplicity and ease of performance will reduce risk. The world does not work that way.

Many expensive and complex transactions can be undone. Many simple ones cannot.

For example, many people spend a great deal of time and trouble buying a house. How much risk is there if they are wrong? Probably not much. Put it back on the market and likely you will lose little more than some time and some sales and closing costs. If those costs are affordable, the deal is not risky.

In the same vein, a decision to sell your home is typically not easy to reverse. It is counter intuitive, but selling your home is actually riskier than buying it. If you sell and you don’t like the result, could you get it back? Probably not.

This is an important consideration if you are counseling people who have lost their spouse. That is one of the reasons that there needs to be a time span to adapt to a new life.

What about the decision to have your first child?

Very high risk! Your whole life will be changed and you can’t send the child back if you don’t like the change. Subsequent children are not without risk, but they are much lower risk. The first child changed your life. On the risk side, later ones just increase the noise.

Some financial actions can be reversed, while others cannot. Pay attention. Read the fine print or get assurances that you can change your mind.

A wise planner examines the ability to reverse any material transaction. If an action cannot be reversed (life annuity) or would be very costly to reverse, use great care.

Typically, there are no do-overs with a will or an estate distribution plan. A good lawyer will tell you to take the care you would if you knew it was your last opportunity to express your wishes. One of them will be your last opportunity.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

Go Ahead! Take The Cover Off.


In the spring of 1954, there was great tragedy in the home of my grandparents, just up the street from where we lived. A wonder of the mechanical world of that time had stopped working. Their brand new, pop-up toaster, would not pop-up.

My grandfather worked in a factory fixing machinery. He was a very practical guy. He liked to tinker. The toaster had moved to the bench in his workshop and I was curious to see how he would fix it.

He told me to take the cover off. I was 6 or so, and of course was not about to touch anything. After all it was nearly new and a marvelous thing.

What he told me next has stayed with me my entire life so far. It gave me permission to expand, to try things previously untried, to experiment, to discover.

He said, “When you take the cover off, if the machinery is well made you will be able to see what they are trying to do with it and you will be able to see what made it fail. That is when you decide what to do next. You cannot know what to do with the cover still on. If it is not well made, you won’t learn much by taking the cover off, but if it is poorly made and already broken, how can you make it worse?”

Since then, I have been able to take the cover off broken things.  (There are some that would argue obsessed to do so.)  Many are well made, a few not so much. Some are more complicated than I anticipated. A 35mm camera comes to mind. That did not end well.

Some manufacturing techniques have made things close to unrepairable, at least by me. Children’s battery-powered toys fit that category. More generally, with almost everything electronic, if there is power to the board and it still does not work, I am done here.

Financial planning and tax planning and computer programs are a bit like this, too.

When you take the cover off you find that many were not exactly created, they evolved. They may have had a place to go in the beginning, but over the years convenient patches and well intentioned tinkering have rendered them both inefficient and, because of no useful documentation, beyond understanding.

I had a client who used to scour the computer scrap yards for machines that had been disposed of by others. He had a 20-year-old computer system, from a defunct manufacturer, running self-developed software that his business used every hour of every day. As you can imagine, you could not get the pieces at Best-Buy. The cost to rewrite the programs was material and easily postponed as long as he could keep finding old machines to cannibalize. Expansion was a problem but one that was easy to postpone one more day.

You eventually have to pay the price, you might as well enjoy the simplicity and efficiency in the meantime.

Your life will be better if, every once in a while, you remove the cover on your financial plans.

Look at them objectively. What do they purport to do? What resources do they do it with? What is that part for!!!?? What is the timeline? How do they interact?

Try to pay as little attention as you can to what brought the plan to this point.

Learn from it, but don’t use how you got here to rationalize the current reality. As you examine the current reality, be a Martian who knows nothing of history. Pure objectivity.

You aim is to answer a simple question. “If this plan and its implementation did not exist today, would I create this exact structure to achieve my known goals?”

If you can say “Yes!”, then replace the cover.

If you cannot say that, try to conceive of a plan that will be both efficient and exactly representative of your best way to resolve your problems and exploit your opportunities. If your world is complicated enough, maybe a factory-trained technician is required. Seek help if you need it. If nothing else, get someone skilled to look over your ideas and make recommendations.

Be brave.  You can learn quite a bit by removing the cover.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

Can You Be A Sales Manager?


Back in the early ’90’s a friend lost his job as plant manager when the parent company moved the operation to China. Rather than move, he applied to the town for the job of “Arena Manager.”

“You have no experience with arenas.” was the principal objection.

His reply, “Do you want to hire someone who knows about arenas, or do you want to hire someone who is a manager?”

His view was that a manager did not need to know how to fix a compressor, all he needed to know was that it is broken and that there is an 800 number for the company that fixes them. His real contribution would be to be a leader, to delegate projects and tasks, to anticipate problems, to husband resources and to understand the reality of what arenas contribute to a community.

Management is a subtle skill. Its principle component is the ability to achieve results through properly using others.

That requirement automatically deletes skilled salespeople from consideration. Almost all of them are successful because they can manage themselves and require control over the process. They get impatient when the others do it differently. In a counter-intuitive way, it is more likely that the weak salespeople will make the better managers.

In homage to the “Peter Principle” many a fine salesperson has become an unhappy and unproductive sales manager. If you have fallen into that trap, you have choices.

  • Change who you are
  • Change what you do

There is a Turkish proverb that says, “If you find yourself on the wrong road, turn back”

Changing what you do is easier than changing who you are.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

Planning Fails When …..


Planning fails when the the client and the planner perceive a large goal and attempt to reach it in several small steps.  The rule is, “You cannot cross a wide canyon with several small jumps.”  And yet, to try to implement one big leap is just as failure prone.

It is a self contradicting idea that presents a deeper truth.   Like “You must do it alone, but you cannot do it by yourself.”

Our contradiction is, “You cannot solve a big problem with several, preplanned small steps and you cannot solve the same problem with one big preplanned step.”

What are the deeper thoughts?

  • If the problem is big, you cannot see the solution from the starting point, so one big leap won’t work very often.  If you can see the solution from the beginning, it is not a big problem.  Perhaps more correctly, problems to which you know the answer are not, by definition, problems.
  • Big problems can be broken down into smaller pieces, but you won’t know what the pieces look like until you get involved with implementing.

The solution to a big problem is to iterate the answer.  Use the results of each step to condition or redefine the next step.  Begin with the end target in reasonably clear focus.  Outline a candidate series of steps.  Implement a likely first step.  Use what you have learned from that step and decide if the original target is still clearly and properly defined.  Modify the outline.  Decide to proceed or not.  Take the next likely step.  Revisit the target and see if modifications are needed, either to the target, the projection, or to the steps taken so far.  Take another step.  Repeat as necessary.

Sometimes you will need to return to the beginning because your original target has been found to be a flawed description, or the process elected so far can now be seen to be no solution.  The ability to restart is an important design element.

Consider whether it is even possible to get where you want to go.  If not, invoke Max Ma’s wisdom, “That is not a problem; that is impossible.”

The danger for most people is two-fold.  They do not clearly know the endpoint and they are careless in the choice of the next step.  They often invoke the Greedy Algorithm.  Even if they reach a good conclusion using that process, (which is no certainty) they will have learned nothing.

When you purposefully reach the iteratively amended target, you will find several useful things have happened.

  1. You will understand the target (even if you did not need to revise it) and you will understand how the process attaches to it.
  2. You will have a maintainable process.  You could apply it again to similar situations with appropriate amendments or you can amend it successfully if things change.
  3. You will be able to define new goals in which this target is one of the steps.

In mathematics and physics and I suppose, business, an elegant solution has three characteristics.  It will be simple, it will clarify the problem and it will give a hint at why the solution works.

Big questions need good answers.  Good answers are ones you learn from.  They are elegant.

Be careful.  It is never a solution to implement an action and then bend the problem to validate the process.  That is like doing the budget at the end of the year.  Surprising how often you get that right.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

Planning Succeeds When …….


Financial advisers have a difficult job to do and most do it well.  BUT, it is harder if the client doesn’t know enough and it is harder if the adviser does not find out enough.  Where to begin?

Clients need to know about:

  • Investments and their relative merits
  • Insurance and probabilities
  • How spending changes over time
  • How to set priorities when the resources available cannot solve every problem
  • How to set policies.  Things like the welfare of my children is first, then …
  • How to acquire and use advice
  • How much security is enough
  • How the future self and the present self are connected.
  • How to deal with risk
  • How to make decisions

The adviser needs to learn softer things.  My experience is that there are three that should be reviewed specifically.  It is surprising what comes up.

What are your:

  • Hopes
  • Fears
  • Expectations

The purpose of this is for the adviser is to find ways to minimize the fear inducing events and bring hopes and expectations as close together as possible.

When the adviser approaches from this starting point, it is easier for the client to learn what they need to know.  Because it has context.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

How Financial Planning Works


This is immensely simplified, but probably as good as any other explanation you will find.

Why Financial planning works

Happy Monday!

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

The 30-Second Life Insurance Interview


If you work in the family market for life insurance, you might want to try this interview.  Since it only takes about 30 seconds, you could theoretically have a lot of rejection and still be okay. 

Do you have a will?

If No, “If you had one, what would it say?’

If Yes, ‘What does it say.”

Expected answer.  “I leave everything to my wife.”

What’s everything?

Expected answer,

“House, car, cottage, retirement plan, some investments, ……  “

Would she become responsible for any debts?

Either yes or no, next question follows.

Do you think she will need some cash?

You will be quiet as a mouse here.

If Yes

Would you like to see the provably least expensive way to get it for her?

If no

Life is complicated and changing.  Would you have any objection to me:

  • reviewing your current insurance portfolio and making some recommendations
  • working up a capital needs analysis just to confirm that everything would be okay,
  • working up a capital needs analysis for your wife,
  • reviewing your will to look for efficiencies if there is a will, or
  • making some suggestions about what should be in a will, and why you need one, if there is not.

This will be more effective if you can modify it to suit your particular style.  The questions to deal with the final no should be in your comfort zone.

You might also consider printing the interview form on a piece about three times bigger than a business card.  Your contact material on one side.  The interview questions and answers or check-boxes on the other.  Leave it with all people who answer no.  You can never be sure that the endangered spouse won’t notice it.  The “No” to the “Do you think she will want some cash?” may get some positive calls.

This does not work every time by any means, but it works more often than you might think.

 Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

What Is Your Idea Of The Best Question?


Any good question will take you places that are unexplored. Some of them provide fertile areas for growth and learning. There are even formal techniques.

My personal favorite question is, “Okay, what then?”

How did I come to that question you ask?

Four answers.

  1. It is supportive of the proposed action, assuming it is likely to be productive, and
  2. It helps people to avoid “greedy” solutions. See the Greedy Algorithm. and
  3. Once answered it reduces the likelihood of unexpected outcomes.
  4. It helps you to understand some simple relationships. Things you punish, you will get less of and things you reward, you will get more of. It will be best if you know generally what more or less means to you

In a world with finite resources, choosing one thing always means not choosing some other thing. Often, people ignore other possibilities because they are in love with their preferred answer.

Suppose your best friend says, “I have lost my job and I am going to bet all my money on one spin of the roulette wheel. ”

Okay, what then?

“If I win, I will have enough money to go back to school and develop my skills.”

“And if you don’t win?”

“I will not be able to pay the rent or buy groceries.”

Time to push reset.

Sometimes there are deeper outcomes.

  • A strong Tenant Rights Act will reduce the amount of rental property available. That is a problem for tenants. Who could have seen that coming?
  • Diverting corn to make fuel will cause a rise in the price of every commodity dependent on corn. You may recall food riots in Haiti, Bangladesh, Egypt and Mexico in 2008. Kind of obvious.
  • If mortgage rates fall, could you reasonably expect to see house prices rise. If mortgage rates go back up, do you think house prices will fall? An easy one.
  • The government raises tax rates, and people work harder at avoiding taxes. Who knew?
  • I an going to quit my job and start a business. There are quite a few what then’s to ask.

It usually helps to find a way to organize complicated decisions. You can do a lot of profitable business thinking with a pencil, well I suppose a computer today. Here are two techniques that I find useful. Your mileage may vary.p

Build a decision tree. Decision trees are commonly used to help identify a “best in the circumstances” strategy. There is software available to help.

You might also find “mind mapping” useful. I have used NovaMind and have found that it helps.

Well-meaning decisions that are only examined for their next outcome are potentially dangerous. It is like chess. If you only look ahead one move, you will seldom win. Never win against someone who knows more than how the pieces move.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

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