Many of you probably read Benton’s “Big Fish” story in our last quarterly commentary (if you haven’t seen it yet, check it out here). While I appreciate his story on many levels (the idea of patience, low expectations, big wins, and family time just to name a few), I couldn’t help but think of the last time I went fishing. I should preface this by saying, I am not a fisherman. The first and only time I can remember fishing was when I was around five years old. I still have the picture of me holding up my five-inch “big fish”… I think my proud smile was wider than the fish.
Last year, I was visiting my nephew, Ian, in upstate New York, who just so happened to also be five at the time. He begged me to take him fishing in a canoe. I cannot say no to this child so of course I acquiesced, with the caveat that he allow me to bring my own “child”—my 30-pound, three-year-old dog named Ralph.
Ian, his father Greg, and I paddled across the reservoir to the other side near a reedy copse of trees where there would surely be some fish hiding. I sat with Ralph (the dog) calmly in the middle seat and, as we neared, Ian’s line became entangled in some of the reeds. I laid down my paddle and attempted to help him. Moving slowly, careful not to rock the boat, I felt the boat suddenly shifting to the right; I leaned hard to the left but quickly realized there was no fixing this and into the water we all went. I may have forgotten to mention that it was September and the air and water temperature were both around 50 degrees.
I’ve had a year to reflect on this experience now and Benton’s article inspired me to think about this through the lens of financial advice and the lessons it inspired.
I’ve already mentioned that I don’t fish. And you may have guessed that my dog had never been in a canoe, much less been swimming. While my brother-in-law and nephew were familiar with fishing in this reservoir, neither of them had ever taken an inexperienced third person and a dog along. Nonetheless, somehow it seemed logical to pile all of us in a canoe with our gear, and paddle across the lake on a chilly fall day. In hindsight, it was a bit ambitious.
Lesson: Financial planning can be the same way. When wading through the myriad decisions about your financial goals, it can feel overwhelming. If you start from the edge, rather than paddling straight to the middle, it makes the process manageable and you will be better prepared to spot pitfalls. Make one decision at a time. For example: do you want to pay for your child’s college tuition? If so, then start to make the small decisions around how, and how much. If not, then move on to the next big decision, whatever that may be for you (retirement planning, succession planning, estate planning, etc).
We had a mess. Paddles were floating away. Fishing rods were tangled in reeds. Tackle boxes were sinking. Meanwhile a dog and a five-year-old were attempting to keep their heads above water. We needed to right the canoe, and quickly. Greg and I agreed that we should attempt to lift the canoe up over our heads to release the water and then flip it over. But after struggling to flip a canoe filled with 400 pounds of water, we realized it would be a lot simpler to just ease the boat over to the nearby muddy bank and dump out the water.
Lesson: Your estate plan is the same. Keep it simple. We always want to make sure that we are addressing your concerns and goals through the most efficient means without introducing unnecessary complexity. If you don’t understand your own estate plan or what it accomplishes, how can you expect your heirs to understand it? You may never be able to recite every nuance but you should be able to explain it in broad strokes. If you can’t, make sure we know that so we can continue to help you learn it or find ways to simplify it if possible.
Everyone, including my dog, was wearing a life jacket that day. As I put my jacket on, I thought, “I’m only wearing this to show Ian proper water safety.” And my dog had a life jacket more for the silliness of it than any thought that he would actually need it. Clearly, I was wrong. After the boat flipped I was thankful for the life jackets keeping the two smallest passengers afloat so we could manage the rest of the mess at hand. Aside from the shocked expressions on both of their faces, they were just fine and ready for action.
Lesson: We can’t always know what the future holds; in fact, except for our own eventual demise, we don’t really know what will happen. But we can prepare for most eventualities. This means, among other things: planning and saving for college education for your children or grandchildren; saving for retirement; owning life insurance when appropriate; having sufficient liquidity through short-term savings and the bond allocation in your investment portfolios; establishing trusts to protect assets from creditors or to ensure your future heirs use the funds the way you hope; and making sure the people closest to you in your life are aware of your decisions. Authorize someone to act on your behalf for health care and financial matters—execute a health care power of attorney and a general durable power of attorney; update your will to include all matters important to you, not just how your assets should be distributed. You can even draft separate letters that can provide specifics on how certain tangible personal property should be distributed, where you want to be buried, and how you want your remains to be handled.
The first thing Ian told me after we pulled the boat to shore was that he had been stuck under the boat for “like a whole minute” (really more like a few seconds) and that he used his knowledge from swim lessons to hold his breath, grab the lip of the boat, “kick really hard” and pull himself out from under it.
Lesson: Financial education is something that we feel we do really well at Bragg. (See lesson #2 about understanding your plan.) We spend a lot of time with you to ensure that not only are you able to meet your financial goals, but you’re well educated in the process. That way, if the proverbial boat flips, or the market tanks, you don’t have to panic. You just think of all of the discussions we’ve had with you to make sure you can swim. We prepare you for those moments.
Even though everyone in the boat had a life jacket, Greg and I did a quick scan immediately after the boat flip and again on shore to ensure everyone was ok (yes, of course including my dog!).
Lesson: If you don’t know someone has a problem, you can’t address it. The same goes for your financial assessment. We enjoy meeting with you regularly to check in, to make sure that we are addressing all issues and to anticipate any future needs. Every time you speak with us we will make sure that we have covered a variety of financial topics with you and that you understand what they mean for your goals. These topics include your budget, cash flow and accumulation or spend-down plan, your insurance needs (life, property and casualty, and health care), your retirement options regarding Social Security, required draws from annuities or IRAs, your estate plan (not just the standard estate planning documents but also a review of your beneficiary designations and the coordination with any other plans you have in place), family dynamics and business succession planning, and of course, your customized asset allocation, which is the tool to help you achieve all other goals.
After we were all safely back in the boat (albeit, soaking wet and cold) and began to paddle back, Ian looked at me and parentally asked, “Now, what did we learn from today?” I laughed at this phrase coming from a five-year-old and responded “That the water is cold?” He countered with, “We don’t let dogs in the boat!” He was convinced that it was Ralph’s fault that the boat had flipped. I, however, was fairly certain that it wasn’t since I had my eye on him the whole time. Nevertheless, I realized that arguing with a five-year-old wasn’t necessary and simply nodded and smiled.Later that evening, after Ian was soundly sleeping, Greg and I recounted that day’s events to my sister. It was then that I learned a key detail. Greg had been sitting behind me at the rear of the boat. I did not know that he had opted to sit up higher on the hull for steering. He had carefully judged the balance of the boat but with a slight weight shift by my dog, he was unprepared to counter it and fell over. His weight was enough to take the entire boat with him.
Learn from your mistakes.
As we now know, my brother-in-law had taken a risky position in the boat for which we all paid the price. Don’t do the same in your portfolio. In the long run, avoid the high-risk approach, diversify, and stick to the well-known rules of investing. In other words, stay in your canoe seat!
You see, tough times are inevitable. When you find yourself in such a period, dry yourself off, dump out the canoe and paddle on. Bad markets, health issues, job losses, family trouble—any of these could happen. You can recover. Make a plan and get going again. We can help.
I didn’t catch a single fish that day but I learned a lot and I have a wonderful story to remember with laughter for years to come. In the end, if we can learn to find the humor and go back out to fish again, then we must have done something right.
This information is believed to be accurate but should not be used as specific investment or tax advice. You should always consult your tax professional or other advisors before acting on the ideas presented here.