Ep # 78: Shifting Focus From Control To Influence When Planning

Benjamin Haas | Jul 6, 2022

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Benjamin Haas 00:00
We want to focus on what we believe financial planning is and that's helping point people in the right direction. But making sure they understand the difference between things they can control and things that they can only influence. Hi everyone and welcome to A/B Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now! Good day, Adam.

Adam Werner 00:43
Good day, sir.

Benjamin Haas 00:46
Awesome topic today, I really want to like crystal clear on the fact that this is going to be a little fluffy. Financial Planning means so many different things in so many different situations. But I think what we really want to hit on today kind of speaks to how maybe a lot of different people are feeling angst, uncomfortable. It's not just the markets. It feels like politics is back out there in a way that's really driving emotions. We want to focus on what we believe financial planning is and that's helping point people in the right direction. But making sure they understand the difference between things they can control and things that they can only influence.

Adam Werner 01:33
Yep. So with that kind of as the primer or the primer, I don't know how you pronounce that. I always said primer. But I've heard people say primer. With that is kind of the backdrop, then yeah, I think we often see with different people that kind of go through this planning process. There's the misconception that you're going to go through and I'll use air quotes "the process," figuring out, put me on the right path. But then it doesn't end there and I think that that is sometimes the misconception is that we're going to give all this advice. Here it is in a written form. Here's the to do list. Here's who needs to do what, by when and send people on their way. Good luck, I hope you reach your destination. I think it's clearly to us, financial planning is more about the ongoing assessment, the ongoing reevaluation, course correction, making sure that as things change because that's inevitable, right? It's very, I don't know, it's very rare that we work with anybody that, even if it's a year or two later, we've written plans and six months later, life completely throws a curveball. And now

Benjamin Haas 02:47
Oh, my god, yeah.

Adam Werner 02:47
Things go in a completely different direction than the plan, capital T, capital P (The Plan) dictated in the not-so-distant future.

Benjamin Haas 02:58
So that can show up in so many different ways to and I think the reason that you and I have a passion around this topic is we have seen and will continue to see the psychology of money put people in a really bad spot. I think sometimes that comes from believing you could control outcomes, believing that if you did x, y and z, it would lead you here and that's a very, very dangerous thought process.

Adam Werner 03:21
Yeah.

Benjamin Haas 03:22
Right, because that can lead to not only despair if something happens and look, I think we may be running the risk of running into a dark spot here. But you and I, the gentleman we spoke about yesterday did not come home, cut down a tree, believing that would be the last thing he'd ever do and leave his kids behind.

Adam Werner 03:37
Yeah, yeah. Right.

Benjamin Haas 03:38
You don't grow up believing you're not going to see your kids go to high school because of the health of them. You can't control the world around you. You can't control what happens this weekend, next weekend. You can't control the markets; you can't control inflation any more than you can control the weather this weekend that's going to ruin your beach vacation. So, I think it's really important to, in some ways, be okay with that. Be okay with recognizing that the planning process is to make really educated guesses. Don't get me wrong, we want to do that. Right? We want context. We want statistics. We want to help you create the right habits but understand that you can't control the outcome. All you can do is influence it.

Adam Werner 04:23
Yeah, and just that concept in general, I think if people are probably listening to this thinking, well, that sounds terrible. If you know, if I can't control something, then what you know, what am I even doing? And why even bother? Right? That's the despair side of things. That's the cynical side. If I can't control it, well, then who gives a crap? Let's just do what we want to do and how everything's going to shake out in the end, they shake out. But that's not to say you can't influence or steer right in different directions and I think you said it right. Being okay with some level of uncertainty because by the way, that level of uncertainty is going to be there, whether you like it or not. I guess that's the psychological component of just being able to kind of put those things in a box. These are definitely things that I have zero control over.

Benjamin Haas 05:17
Correct.

Adam Werner 05:18
But all of these things that we'll talk about that maybe you can control to some degree or you can at least influence. Then, making sure that you at least have those in a spot that feels comfortable so that when you are faced with the things you cannot control, you at least have something that is guiding your decision-making process and you can adapt.

Benjamin Haas 05:43
Right, because at times of chaos or times of emotional stress, more than not, that is the pivot point where somebody can go through self-sabotage. That's why we say, if we can accept that certainty of uncertainty in the future and focus on putting this map together, acknowledging that the landscape is going to change, then I think it does behaviorally help us go - okay, I didn't know exactly what would happen. But I was preparing myself to adapt. I have a process for reassessing where we're not going back to ground zero and saying, well, crap, now what? No, it's going okay, if this isn't a new environment, what can I do to course correct a little bit? So I think you said that really well. I want that to be the lens that people look through when they think financial planning.

Adam Werner 06:38
Yeah, the thing that just popped into my head, there was a MythBusters episode if you remember that show where they blindfolded people, so they had no reference on sight, and had them attempt to walk in a straight line and without fail, those people ended up walking in a circle. Because without some sort of, say the North Star, right, without some point of reference, your equilibrium internally just caused you to veer off course and you ended up walking in a circle. I thought that was just astounding but to us, I think financial planning is no different. You have to have that point of reference. Along the way, I made the joke earlier, it's the analogy like the Titanic, you wouldn't set your course. You wouldn't plot your course on day one and never check in again to make sure that you're on course till you hit some sort of land. God forbid, it's an iceberg that's in your way. It's making sure that you are course correcting on an ongoing basis. I know now, we've probably sufficiently driven this point into the ground. But the point is, the more often you can reevaluate, odds are you'll stay on your intended path or at least when things do come up, they don't have to be major life shifts either. These could just be small changes in the economy, in tax legislation, just in your own little bubble.

Benjamin Haas 08:10
A job change. Inflation. These are things.

Adam Werner 08:14
Yeah, and it doesn't necessarily have to be a wholesale shifts and now we need to make a left turn, it can just be well, we need to course correct a couple of degrees left or right to make sure that we're still again, on the path that fits. So, a long-winded way of kind of backing our way into things, you can control things you can't, but then I guess we should try to go through some examples.

Benjamin Haas 08:39
You can control your budget, you can control your spending, you can control, what else? Putting money aside for an emergency?

Adam Werner 08:49
Yeah.

Benjamin Haas 08:50
We could probably debate you can control how much risk you're taking in the market. That is quantifiable. Let's be honest, like, what else can you really control? Or is that kind of it?

Adam Werner 09:04
Yeah, I think in our terms, that's kind of it. They were I know, we've said this in different iterations of conversations, whether it's on a podcast or not but where we see success for most people and thinking retirement planning, longevity planning. It's the basics. Do they save? Do they live well within their means? And that's that, I mean, we can kind of distill it down to those two things. Do they live within their means? Are they doing the right things from you know, a saving and investing and life standpoint? And if that's the case, then everything else will eventually fall into place in some way, shape or form. But yeah, I think it really is controlling your income and expenses and you said the risk side of things. Controlling your investments so that you're not invested in a way that you can't ride out.

Benjamin Haas 10:04
Right.

Adam Werner 10:05
Because that's ultimately where mistakes happen, you use the term self-sabotage and that is crystal clear in that I'll think back to March of 2020 when it felt the bleakest. COVID shutdown happens, the market is in a freefall for a three-week period and we had a client of ours that could not stomach the ride anymore, and chose to liquidate and go to cash sometime towards the end of March. Which by the way, pretty much was the bottom at that time and that's not something then that they're going to be able to rebound from when you make an emotional decision at a time that it felt good to do that. But in hindsight, probably wasn't the best thing.

Benjamin Haas 10:52
Yeah, because we believe as we continue to study this about the emotional impacts of financial events in our client lives. Maybe this is a good clarifying point. I believe it's true that you can't control your emotion. You can control how you react to that emotion. There's some choice in that and I think that's kind of what we mean here. You need your actions to be put in check and controlling risk is something that you can control in a way but even there, it's not like markets are acting normally right now. When they go through our risk tool and say, within a 95% probability, here's what risk is going to look like. Well, guess what? There’s still 5% of that, that kind of feels like it's happening right now in bonds, right? And so even that, I think that speaks to why there's a plan in partnership, that we are there to be a guide for you, to stand next to shoulder and shoulder and try our best to go. Look, we understand how you're feeling, we understand what this means. We need to protect you from doing this because that is not going to put you on the path forward that you need. If money is the tool you need to live the life you want to live. You may not understand it, but this is self-sabotage. If you take this step, you will ultimately be taking a huge step backwards.

Adam Werner 12:13
So then do we pivot to maybe some of those things that you may not be able to control, but that you can influence?

Benjamin Haas 12:21
I feel like this is almost everything else and hopefully. So I say that because I hope it feels better to go positive here for a little bit. We can probably talk about in the impact of negative events because it is these pivot points in life that usually are where we see plans go awry if we don't handle it the right way. You can choose to write a Will not knowing when that will be needed. Sure, but you certainly should be taking the step to influence what would happen at that time.

Adam Werner 12:58
Another one that's very similar to that is insurance. We, like everybody who has a car is required to have car insurance. When it comes to anything on the personal side - life, disability, long term care, there's not requirements but that is something that you can influence based on, God forbid, having those what if scenarios, the what if questions. In my own life, it's what if I did not come down the steps yesterday? What would I want to see happen for my family? And I have to be okay with that means either I need to go get insurance to protect what I need to protect or if that's not the answer, then I need to be okay with all of the other tradeoffs that may come along with that. At the very least, having that conversation and being thoughtful on, okay, if these are my two options or in this scenario, two options are insurance or no insurance, then all of the other dominoes that will come along with that, just go through the exercise, so that it's not one of those fire drills that now something major does happen and you're not prepared. You haven't done any sort of prep work or you haven't gone through some of those thoughts in a calmer time. Again, using your term self-sabotage, that's where we can kind of see things go awry or the unintended consequences of some decisions that were made in the past.

Benjamin Haas 14:34
That's the precise moment where that emotional travesty could also be a financial one. If you didn't go through the process of kind of just being open to okay control what I can control. Let's not worry about the big bad world ahead of me and what may come my way. We cannot control those outcomes. The world is a chaotic series of unpredictable events. But you can choose to control putting those documents in place, you can have the influence of a financial planner going, let's think through these things together to figure out what's best for you and when something happens in life again, now it's a course correction. It's a pivot. So, even though I will say the littler things, when it comes to, you can influence your likelihood of success short by choosing to do certain things and do things differently. We can show somebody that your ability to get higher returns is going to come from historically stock exposure and not bond exposure. But we can't know to what degree that will happen in what series for you. So, I don't know what else you may have under the list of influence.

Adam Werner 15:50
I was going to say there's two other things that popped into my mind in thinking that you can't control the market. You can't control the direction. You can't necessarily control that outcome but you can influence at times of stress, like now, we try to view things opportunistically. We can't control the market that the stock market is down, you know, 20% or more, we can’t control that bonds are down 10% or more, but we can influence the tax side of things. If you invest in a non-retirement account, maybe it makes sense to harvest some of those tax losses for tax purposes. Maybe depending on your situation, it may make sense right now to look at a Roth conversion as a way to try to take advantage of those negative scenarios. In the grand scheme of things that may not be the hugely impactful items but little tweaks along the way do add up to bigger shifts down the line.

Benjamin Haas 16:53
Yeah, and just to make a counter example on that, to believe you can control the fluctuation of your portfolio by timely getting in and out of the market by choosing to go to cash and then come back in or, hey, we see the markets falling, why don't we go to cash? That I think is one of those examples on the other side that goes, you're not focused now on the influence you can have, you are believing that you can control the timing of things. You can control protecting your principal and if that's the case, then you probably just should not be investing to begin with. But I think that's a good illustration of yes, you're giving the great example of what you can do at that time of stress that actually helped you longer term. Where I'm still living in the negative here and showing the frailty of trying to feel like you can control timing of things.

Adam Werner 17:44
Yeah, but even in those two things that I mentioned, right, you're looking at an opportunity or you're looking at things as an opportunity, rather than kind of dwelling on the negative that, again, you can't control. Sometimes, it's just that simple shift in perspective that we do see behaviorally lead to longer term success. I think, ultimately, we've used this term so many times but it's about flexibility. It's about being able to adapt in those times when opportunities present themselves and I think, ultimately, we don't want anybody that we work with, for sure, to feel like they're backed into a corner. That they only have one option at any point in time and we are just huge proponents of giving yourself flexibility and giving yourself options at any future point. So that when your scenario does change, you're able to at least make a decision based on that period of time, what you have going on your individual situation and what makes sense for you and not just the blanket, well, I set this course three years ago, so I know exactly what decision I'm going to make. When again, in our experience, life does change fairly rapidly or it can over time.

Benjamin Haas 19:04
I think that's a beautiful way to wrap it up because I think what you just spoke to, the word that was in my head was just partnership. Going back to the first comments, what is financial planning? It needs to be this partnership because whatever you're going to go through whether you feel you can control something or only influence, I can promise you with a good deal of certainty that we've gone through it before. We've had to guide somebody through that experience before. You're not on an island. You do not need to feel like gee, I wish I could have predicted this. I should have made a different decision. I'm mad at myself for this. Why didn't we do this? We've been through it before and that's the point in partnership, that the burden you're carrying can be halved by having us with you to talk about it, to work through it, to make those pivots. I can also promise you when things go really well, the joys can be doubled. We want to be a guide that gets you to where you want to get to. Money's the tool to lead you to the life that you want to live. We'll celebrate that joy with you. So, I hope this was helpful because it is a little bit fluffy. Like I said, it's about perspective but I just want to see people being okay to influence things. That's good enough. It's not just good enough. It's great, as long as we're reassessing it frequently enough.

Adam Werner 20:22
Yes. Yep and that's the key.

Benjamin Haas 20:25
Thank you for your time, perspective, as always.

Adam Werner 20:29
Likewise, thank you.

Benjamin Haas 20:31
Go enjoy a little sunshine.

Adam Werner 20:34
Till next time.

Benjamin Haas 20:46
Hey everyone, Adam, and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only and are not intended to provide specific recommendations for any individual to determine which strategies or investments may be most appropriate for you. Consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening! Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.

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Ep # 78: Shifting Focus From Control To Influence When Planning