In the complex world we live in, we all face leaps of faith.  We grapple with opacity.  How is a taxicab different from an Uber ride?  What is a bank really charging us for our checking account or credit card?  Is the product I got from Amazon just as it was advertised? 

Nowhere is this more obvious than in the financial advisory relationships in our lives.  We are deluged with advertisements, calls, recommendations, opinions, and seminars sponsored by people with claims of outstanding performance and investment acumen.  Three or four (or ten) years later, things don’t always seem to have lived up to our expectations.  People like Bernie Madoff abscond with the wealth of their clients.  Experts have runs of bad luck, and predictions go awry.  Sometimes we don’t even know it is happening, until the damage is done. 

Most of us can recall the recession in the early nineties, the S&L crisis (Drexel Burnham Lambert ring any bells?), the internet boom and bust in the late nineties, and the financial crisis. Each time, trust was shaken. 

At Plan for Your Tomorrow, we have a simple formula to show our capability and integrity every single day.  It is a four-part program:

1. Be transparent, and data-driven
2. Follow through every time
3. Admit we don’t know everything, but be relentless learners, and get help when we need it.
4. Listen, and dig deeper

As simple as this formula is, we believe that it makes a huge difference. 

Of each of the above factors which comprise our culture, I believe that the one I value the most istransparency.  There is no question about our practice (barring those protected by client confidentiality) that I won’t answer.  Costs, performance, expectations, my own expertise (or lack thereof) on any topic…all fair game.  How do we protect our clients from the misfortunes listed above, and how confident am I in the plans we make?  A good question.  Happy to chat about it.

I believe that transparency is the primary building block of integrity, and without integrity there can be no long-term trust.  Without trust there is less discussion and less sharing of dreams and goals.  Without that sharing, there is no viable planning.  Without planning, success is…problematic.  How can one of our clients get where they want, if we don’t take the necessary steps at the proper times?

As we bring new clients into our practice, it is astonishing to find out how often they have gone for years without any objective measure of their relative progress.  I am talking about the performance of their investments, after accounting for additions and withdrawals.  I am also thinking about financial plans, but I think we covered that in the last several posts.  Clients come in with spreadsheets, or notebooks, or binders filled with statements, and no real consolidated view.  Mostly they come in questioning the assurances they have been getting about how “great” they have been doing, because the data is just not there to tell them one way or another. 

The key word is data.  We believe in the power of information, if properly applied.  Assurances are nothing, if not supported by the data, and its analysis.  I used to work in a place that allowed only reverse-engineered performance analysis.  Many people still do.  They start with what they have today, and imagine the current mix of holdings had been purchased at some point in the past, and then “analyze” the portfolio to see how it would have done.  They propose that this measures the quality of the investment plan.  This imparts a definite hindsight bias.  If you are interested, reach out to me and I can give you a ton of examples as to how that can happen.  That isn’t the point of this article, but it is pretty interesting, at least to me.

I want to talk about data, and transparency.  Remember how I mentioned that transparency is the foundation of trust?  Well, in the interest of transparency, we want our clients to be able to look at their accounts at any time (not simply when it might suit us), and not only see that they have gone up or down, but to be able to see how that relates to a wide mix of different measuring sticks.  We want them to be able to see all their transactions, and their performance over any time period they choose, both absolutely and in comparison to the relevant benchmarks.  We want this performance calculation to be objectively prepared by a company that specializes in doing this, with data that we do not have any control over, and therefore could not “massage.”  Furthermore, we want it to be easy.  As much or as little as a client wants, we want them to have the access. 

Access to information is the basis of the freedom.  The right to free speech and an unrestrained press was established by the founders of our nation because informed decisions require data.  Why would anybody expect less?  In our lives, our wealth (and that of our family) is one of our most sensitive domains, and yet many people have advisors with no infrastructure to provide clear and transparent information about a family’s investment holdings. 

So, we have been on a mission to continually extend the amount of transparency we provide.  Performance reporting is one aspect of this transparency.  Investments don’t always go up.  When they are performing poorly, the owner and the advisor need to have a way to measure that, and decide whether it is a problem.  Sometimes it isn’t, other times it is.  We want our clients to be able to know when something isn’t working according to plan, and have an opportunity to discuss it with us.  It gives us a chance to listen, and to follow through.  We can council patience if needed, or to act if appropriate.  We can admit mistakes, or prevent them.  If a client is bothered by a holding, or overconfident in one we can dig deeper, and gain a better understanding.  We have real-time data to use for analysis, and our clients can be confident that the data is objective.  They have the data to do their own analysis if they want.  It creates the opportunity for conversations that we want to have, and I think these are also the kinds of conversations that our clients want to have.  I believe this is a big part of why our clients trust us with their life savings.  We don’t hide, and we are always looking for ways to improve things for them. 

The best part of this?  This can be very efficient.  Our clients no longer need to wait for a month while somebody gathers the data to create some kind of report.  Since our founding, we have always offered daily up-to date performance, at our client’s fingertips.  Our goal is to make it better every year.  We want to make it more transparent, easier to access, easier to digest, and more robust.  We want to make it mobile, on-demand, and customizable.  We have taken great strides this year, and we commit to continuing to push this project in new and interesting directions every year in the future.  Trust me.

NOTE: Past Performance is no guarantee of future results