Sales 101
Thursday, January 26, 2006 at 8amBy John Friedman
I wake up to George Bush giving a press conference.
I have never wanted to have normal blog faire in here — no bald political statements in here — so watch me pull a financial health topic out of my hat/out of my politics.
The impetus for this entry is hearing GW mouth the words emanating from the very clear decision of GW’s marketing team this past week to call the NSA spying program the “terrorist surveillance program,” as well as the all-time classic, with a new name attached to it, of “Sam Alito is a judge who strictly constructs the law; he does not add his personal opinions to it.”
That, and listening on the radio to a recording of George Lakoff giving a talk at The Commonwealth Club as I drove up to Marin earlier this week for a walk with my friend Dick, got me a thinking . . .
Always dangerous that . . .
Now I am not hiding my politics here when I say that whatever faith I had in Bush’s ethical compass (I vividly remember talking with my parents in the late 90s, as the presidential field started shaping up, and saying “I don’t know much about him, but that Bush Junior fellow seems pretty OK, doesn’t he?”) left me in late 2000, when he brought James Baker III in to game the election standoff — you know, that election when the country, instead of electing a winner, flipped a coin which landed on its side, clearing the path for the US Supreme Court to write one of the most disingenuous opinions I have ever read (and, as a recovering lawyer, I have read quite a few). That opinion all but said, “We decided before we got the case that GW wins, and here’s how we’re going to connect the facts to that preordained result.”
Sure, Gore brought in his own heavyweights, and wasn’t above gaming, but in my heart of hearts, I believe that Gore The Politician Guy was subservient to Gore The Do-the-Right-Thing-for-the-Country Guy, whereas with Bush it felt to me like Bush The-Game-is-On-and-We-Can-Win-this-Thing Guy was the only guy who showed up to the party, staying nicely on point all the time, as JBIII and his ilk laid out for him so expertly.
Since then we’ve seen that Bush The Politician Guy has an enormously capable machine. Man oh man, and woman oh woman, can they ever run a campaign — true masters of language and of PR and of modern media. Why, when Andy Card accidentally left a campaign playbook in the park across from the White House, it wasn’t about a campaign in the classical sense at all, but rather a campaign about some political initiative having nothing to do with an election, and the gist of the playbook was Sales 101, e.g., we can’t roll out too much new product in the summer, etc.
Steve Jobs and Regis McKenna would have recognized this thing as coming from their world.
But when it comes to Bush The Executive Guy, there’s nothing there. From Katrina to Kabul, the MBA president seems to have never arrived, having left the execute part out of the job equation (except, of course, when it comes to the other use of that word, i.e., to put to death).
An interesting quandary that, as the image making runs roughshod over the reality.
So, slowly but surely, inch by inch, but now in its totality, I have come to believe that every word of substance out of the fellow’s mouth has to be heard with a hard or soft negative sign in front of it.
So if he says the word terrorist followed by the word surveillance and then the word program, what I can’t help but hear now is the phrase not just terrorists and the phrase not just surveillance and the phrase not just a program.
Add all that up, and what you get is a:
I might be doing anything to anybody non-program program, because, after all [and not that he would know this reference] we’re all six degrees separated from one another, so Osama is like a distant cousin to you all (except for all you good people out there — who have nothing [i.e., everything] to worry about — which is a distinction for me and my people, and us alone, to make).
Now, I’m OK with him snooping all over the place to catch people who want to sucker punch us with NiNY and the like, but I do not trust him/them to check themselves. Hell, I don’t trust anyone to check themselves, and neither did anyone in the last 200 plus years of our country who had anything to say about how we organize ourselves.
And if he says the phrase, Judge Alito does not bring a personal ideology to his judging I hear the phrase, He does bring personal ideology to his judging.
And, of course, all judges do; we don’t need Lakoff and the others to tell us that we are all at least a little bit hard-wired — or a lot — to see the world via a personal ideology. If that weren’t the case, we wouldn’t need judges, because we would all see the exact same truth.
T’ain’t no such thing.
So here’s the financial health tie-in: when I first went into the financial advice arena, I worked for a company that was, at its heart, an insurance company (lots of financial planners are actually insurance salespeople). I call that place the Desert Rose on the Walls place, because this place, like many insurance companies, had a decor modeled around the color Desert Rose, which is a washed out reddish color that is just . . . bland. Insurance offices tend to be pretty bland places (to generalize).
As part of the (usually quite badly done) training I received at the Desert Rose on the Walls place, I learned a thing or two about sales techniques.
In fact, much like GW, those folks put most of their eggs into selling things, rather than figuring out how to help people: more into selling than executing. So for every, say, five hours we all spent learning how to sell things, we also spent, say, one hour learning about those things — how they work, how they can help people, what sorts of folks they are not suitable for, etc.
That was their bent and their priority: sales sales sales sales sales and then a bit of knowledge thrown in.
Now selling insurance is not all that different from selling cars or shoes. Sure, there are differences — e.g., it’s a really un-fun product to own (Gee, buying a Corvette vs. buying some life insurance . . . tough call, that), you hope you never need it, etc. — but selling is selling.
In all selling there is a result from which the salesperson works backwards. That result is “the close,” which usually is a check or other payment that the customer gives to the salesperson, but without the salesperson’s name on it (because salespeople are agents of others, the check is never made out to the salesperson directly; they get paid later). So pretty much whatever gets the customer to that point — to the close — is fine, much like James Baker III running around in Florida in November 2000, and Antonin Scalia having at it on behalf of his duck-hunting buddy’s benefit back in December 2000.
The techniques that the sales theorists out there have generated are, to my way of thinking, quite fascinating, so, by all means, if you ever have a chance to go to a sales class, do! It will make you a better consumer in all sorts of ways.
Here are a few tidbits that I came across in my days at the Desert Rose on the Walls place.
1. To get people to buy financial products, especially insurance, you have to scare the ever-lovin’-bejeesuses out of them. So scare them and scare them good. Otherwise they’ll just think and not get into action. And here action = the close, so action = good.
2. To get people to buy financial products, you have to recite, word by word, certain magic phrases to them. These magic phrases have real magic; mess with the words and they will not work and could even thwart an otherwise imminent close.
3. Learning about any financial product or service prior to a situation in which you can sell that product or service is a bad thing. Learning about products and services without a sale in the offing is a waste of time. Brains cannot hold that info.
4. Never, ever discuss how you get compensated. If asked, do your best to not answer. You do not want them to know your real motivations. Tell the customer as little as you can to get to the close because (a) telling them stuff that doesn’t get you to the close is a waste of time, and (b) the more you say, the more likely it is that you will say something that you will regret.
So here goes the parallel, to show how GW’s selling technique and the one I learned at the Desert Rose on the Walls place have in common:
1. Say the words “terrorist” and “terrorist” all the time. Practice saying the word “terror” because it is a really hard word to say.
2. Say “terrorist surveillance program” rather than “the NSA program” or anything else. Only the first phrase has magic. Anything else can thwart the close.
3. Never roll out too much product at once. Keep the choices few and far between. Keep contracting the universe of possible solutions because the close is always associated with a single solution.
4. Say as little as possible. Keep as much secret as possible.
So do I want to see NiNY? Absolutely not. Am I pro-terror? Absolutely not.
But I do think that an administration that is great at one thing and not great at pretty much everything else should not have the one thing that they’re great at be selling.
When you’re working with people in your financial world, then, I believe it is very important to work with people who appear to be interacting with you on some level other than the sales level.
So you want to find someone who seems to be motivated by their Do the Right Thing side rather than from their Game On, We Can Close This Thing side.
It’s sometimes hard to tell. But it’s easy if you get the sense that they are (a) wanting you to be agitated or Disturbed (yes, that’s the word they use for scaring the bejeesus out of you), (b) regurgitating a memorized script full of Power Phrases (yes, that’s the phrase they use for power phrases), (c) anything less than totally smart about what they are selling you, and (d) reluctant to talk about their compensation.
So the next time you are in front of someone who might be in total sales mode, put them to the test by (a) telling them you want to hear about positive things, not scary things (to see if they can get out of their Gotta Disturb mode), (b) interrupting them (to see if they get flummoxed or insist on coming back to the script), (c) asking them lots of hard questions about why this product or service is just right for you (it’s OK for them to not know every single answer and have to get back to you with an answer, especially answers about minutia because gosh knows there’s lots of minutia in financial products), but if they can’t answer an important question about a product right there on the spot, that’s not OK), and (d) my favorite, asking them what sort of dog they have in the fight, not only for the product they are pushing the hardest, but for any product that makes even the slightest bit of sense for you.
So please, Mr. or Ms. Salesperson, can you tell me how you get compensated if I go ahead and do this?
And for the sake of us all, please oh please GW, will you get your executing up to where it is even half as good as your selling?
Dogs in fights
Monday, January 23, 2006 at 10amBy John Friedman
A friend recently sent me a pdf file of a piece by Yesim Tokat, Ph.D., of Investment Counseling & Research, which as far as I can tell is Vanguard’s R&D division.
Here is the link:
https://institutional5.vanguard.com/iip/pdf/ICRAssetAllocat.pdf
And here are a few paragraphs from the Executive Summary (I guess in blogland I am supposed to call these the money quotes) (edits and emphases mine):
Executive Summary
. . . [W]e conclude that:
. . .
• The ultimate concern in the active/passive decision is whether active management can increase the returns and/or decrease the risks of a portfolio, not whether it decreases the portfolio’s R2 over time or across funds. We find that, on average, active management reduces a portfolio’s returns and increases its volatility compared with a static index implementation of the portfolio’s asset allocation policy.
• The influence of security selection and market-timing on returns can be more significant. However, active strategies tend to have a high skill hurdle, less stable and less predictable relative returns over time, and higher costs.
• Unless there is a strong belief in the ability to select active managers who will deliver higher risk-adjusted net returns, investors’ focus should be on the asset allocation choice and its implementation using broadly diversified, low-cost portfolios with limited market-timing.
So I have to admit that I have not read the pdf file other than the Executive Summary (a good chunk of which is not included above), as my mind starts jello’ing at about the time all the references to R2values start swimming by, with memories of both bad and good statistics classes floating on by with them, together with the unfortunate fact that my last statistics class, at a world-renowned and very fine institution at that, was a terrible misfit of a class that helped turn even the most numbers-hungry among us away from (as Yogi would say) stat-atistics.
But I do have one comment on what I did read. Please read on.
* * *
I am an adherent of passive investing. Passive investing is a friend of mine.
So I believe that most people should put a good chunk of their financial assets into passively managed financial assets because, as the bullet above states, “active strategies tend to have a high skill hurdle,” and because I think very few laypeople have surmounted that hurdle (and only a tad more professional active managers have).
That’s why we get Dalbar studies and the like telling us that, when left to our own devices, most of us active our way into investment experiences that, overall, way under-perform the broad market — way Way WAY under-perform the broad market — so that the average investor, on his or her own, tends to do worse than average when it comes to investing.
It’s like the opposite of Garrison Keillor’s townsfolk.
* * *
As an adherent to passive investing, I have long admired Vanguard and its business model; even to this day I mostly admire Vanguard’s way of doing business.
Both it and Fidelity are private companies, in the sense that they do not allow ownership interests of themselves, i.e., shares of stock, to be sold to the public. And that, perhaps more than anything else, explains why they seem to be a bit more above the fray than the Januses and the Putnams of the world, which, in one way or another, have been divisions of publicly traded companies. (The Capital Group Companies, which puts out the American Funds, the preeminent proponent of the opposite of passive investing, i.e., active investing, is also, as far as I know, a private company.)
But when Vanguard puts out a piece like the one linked to above, I don’t give it all that much credence. Vanguard, as they say, has way too much dog in that fight.
So I would not rest too much on Vanguard’s own research; there are plenty of non-Vanguard folks out there singing the same tune who are much more objective.
Think of it this way: would Vanguard publish this fellow Tokat’s works if he came to the opposite conclusion?
Maybe. Maybe not.
* * *
Now not all that long ago (five to ten years ago?) Vanguard was led by a fellow named John Bogle. He started the company (as far as I know) and was, and always has been, pretty much the pied piper of passive investing. Much to the chagrin of all but a handful of folks on Wall Street, nearly all of whom saw active investing as Us and All that is True and Right in the World (and so what if it screws customers out of their hard earned money) and saw passive investing as The En Uh Me (and it’s a big deal when something screws us out of our hard-earned [by whose standards?] 6- and 7-figure end of year bonuses), Bogle built a mutual fund behemoth built upon passive investing .
Bogle, bless his heart, stepped right into that fray and, even better, thrived inside of it. Doing so made him (presumably) rich, put Vanguard on the (figurative) map, and made passive investing (at least somewhat) respectable. Bogle made it possible for all of us to passively invest. He was in most senses of the word, then, a rebel.
Now here and there I’ve disagreed with some of what John has to say — and I have no idea what his overall politics are; he might have voted for Bush twice for all I know — but in general I think he’s right about most things investing (he has always, for instance, been a big proponent of the idea that dividends are key to investing performance, an idea that has come back bigtime after being out of favor, for, literally, decades).
* * *
And that’s why I am always happy to recommend Vanguard to people: it’s the house that Bogle built, and it’s therefore a great house for passive investing.
But I always do so knowing that Vanguard’s heyday under Bogle is behind it. Passive investing is now too big a niche to be a niche, with Fidelity and E*Trade (a very much publicly traded company for which I once worked, and in which I still own stock) competing particularly well in that field.
And John, as far as I can tell, pretty much got booted out of Vanguard (I’ve never heard the precise story, and I can’t find one online, but as I recall his departure was a big surprise).
So when I see that Vanguard’s research folks came up with some research reaching the conclusion that passive investing is the best approach, I don’t think all that much of it: the passive investing dog in that fight is named Vanny the Guard Dog, and Vanguard the passive investing company clearly wants Vanny the Guard Dog to win.
* * *
Now if the internal Vanguard R&D folks had reached the opposite conclusion — that active investing was where it was at — and had done that when Bogle was still at the helm, my hunch is that Bogle would have gone into a weeks-long study intensive with the researchers, trying to understand their conclusions and the research, because the research was telling him that something he had always thought to be false was in fact true and that something he had always thought to be true was in fact false.
And Bogle seemed like a guy who would really want to get to the bottom of that.
But how about Brennan, the new guy (or not so new guy, I guess I should say) at the helm? I don’t get the same feeling from him. He feels more like an MBA-guy to me, to Bogle’s wide-eyed passive-investing fundamentalist.
So it feels to me like Brennan is a manager who happens to be managing a company which has passive investing as its bread and butter (by the way, Brennan looks an awful lot like the main guy in the 40-Year-Old Virgin, a movie I suggest you avoid if at all possible), while Bogle was a passive investor fundamentalist who happened to grow a very large company based upon a principal that he thought was The Truth.
Personally, I like dealing with people who do what they do because they haven’t a choice: it’s what they have to do because it is them, because it’s their truth.
Now I don’t know for sure whether Brennan has that about him or not. But he’s been in the public eye long enough for me to say that the absence of my having that feeling about him is probably an indication that he doesn’t have it. Bogle, on the other hand, had it coming out of his pores every time you saw him speak or read a paragraph he wrote. He couldn’t help himself, and that’s why I always felt confident in Vanguard’s approach when he was at the helm: it was a company founded upon a principal, with a clear touchstone to always keep its head on straight.
Come to think of it, that’s true for everyone with whom I do business: is there a joy in it for them? Do they do it because they love it, or do they do it because it pays the bills? I’ll always prefer hitching my wagon to people who do what they do because they love it.
So what’d’ya know? I start out to write an entry about passive investing and conflicts of interest, and instead I end up with an entry about a corollary to The Exquisite Balance: about having passion for our work.
January is still with us, eh?
So I conclude today’s piece with a simple exhortation: may you find passion in your work!
NiNY strategies
Friday, January 13, 2006 at 10amBy John Friedman
A friend writes:
that our monetary system will fall and that the
only thing that will be useful to have would be
gold that is in my possession. I am also told it
could happen in my lifetime (and that that is
why the US is always stockpiling gold). Anyway this came from a source,
“not of this world” of finance, so it may
seem a strange thing to think about.
But I cannot seem to disregard the notion.
This is a very tough issue, and one that I have only a brief amount of time to address.
But here goes . . .
This is the “Nukes in New York” scenario or “NiNY” scenario. It’s something a great number of us thought about all the time three and four years ago, and is something that most of us think about from time to time still: what would happen if Osama nuked Wall Street, and really succeeded in taking down our entire financial system?
I have never come up with a good response to the question of how one stays financially healthy when faced with the end of the world as we know it, other than to say that my hunch is that guns and stored food/water/fuel/trusted servants/etc. are going to be a lot more handy than gold coins.
Not a happy thought, that, is it? But there’s nothing happy about NiNY.
So ask yourself this: “If I am (to use a common symbol of unlimited wealth) Donald Trump, and if the end of the world as we know it comes around, what do I need?”
Well, I’d say that you need an army of trusted servants, because gosh all mighty you are not a physically able person, let alone someone who can physically confront all comers successfully, and you need food and water and fuel to keep you and your family and your army and the families of your army alive and warm (because it gets cold in New York, and you might be there when the whole things happens).
But what about gold?
I am not a big believer in the idea that a gold-based economy will, if our economic system crumbles, replace the currency- and digit-based one we currently have (digit-based in the sense that most of our wealth is stored electronically).
If systems simply revert, so that once a system fails what remains is the system that the now-failed system replaced, that would be the case, but the Red Queen (the RQ in JFRQ) says that that is not at all what happens.
So my hunch is that, if the currency-based market goes away, then guns and brute force will be what matters.
Think of it this way: if all hell breaks loose, and you have water and gold but no food and no guns, how you gonna feel walking up to someone with a gun and food but no water and no gold, and saying to him or her, “Will you accept from me my gold Krugerrand for ten [one?] [one hundred?] loaves of bread?
For most people, the next line coming at you right after you ask that question conjures up scenes from Bruce Willis and Harrison Ford movies.
So, maybe, you say, a person’s gold can buy him or her that army once NiNY happens?
Maybe, but far better is to buy the army before you need it.
So if I’m Donald, I have put dozens of kids through college — the kids of my servants — and helped them in all sorts of different ways, so that their parents (a good number of whom I hired for their sheer physical size and ability to keep me and my family secure) will be more likely to stick with me when the going gets NiNY tough — tough in a NINY way.
That being said, I’m always happy to see people with a smidgen of gold coins because (a) they are quite extraordinarily beautiful, and (b) I could be 100% wrong about whether a gold economy could ensue following NiNY, and (c) diversity of wealth-storage techniques is always a good thing.
So what’s a smidgen? Well, that depends.
If I have, say, $100k to my name, I wouldn’t have more than a couple hundred dollars worth, max. There are too many non-NiNY scenarios that are way more likely (e.g., living to be 100 and healthy, and needing to have enough wealth stored up to last me for 30 or 40 years of retirement) to justify having a carve out for something that (a) can get lost pretty easily (we’re talking about the physical sort of gold here, such as coins, rather than the financial sort, such as GLD ETFs), (b) might depreciate badly, either in actually being worth fewer dollars or in terms of not keeping up with inflation (since the $800 an ounce euphoria of the 70s gold hasn’t made much money for anybody until the past six months or so) (currently gold is at about $555 an ounce, up from the low $400s a year ago).
But if I have, say, $1 million, then I could see having several thousand or several tens of thousands if I really want to make a bet and/or I find gold coins as lovely as the guy at Financial Health Blog says they are.
One last thing about gold: for one reason or another, more than a fair share of financial quacks in the world hawk gold. In fact, Wall Street conventional wisdom purveyors even have a label for these folks, which is at least slightly pejorative. They call them Gold Bugs.
Now I’m sure that there are a lot of brilliant economists out there who believe that we will return to a gold-based economy. I am not an economist, and I usually can’t even understand half of what they say, but I am sure that there are some real smarts out there who think that buying gold is a very, very smart, very, very financially healthy thing to do.
So if someone tells you to buy gold and they are an economist, or otherwise outside the financial sales world, that means one thing. But if someone who is part of the financial industrial complex tells you the same thing, be doubtful. And err or running away from them. Real fast. Do not buy that which is offered to you.
And if a survivalist tells you that gold is where it’s at, well, then ask him or her which is more important: the gun or the gold?
But, enough on gold for now. How about other more practical financial health solutions to external calamity?
Well, you know what might really be handy? How about having a horde or two of twenties, and maybe some hundreds (the ones that have Ben Franklin smiling/Mona-Lisa’ing out at you) to boot? How about forgetting about the armies, and how about forgetting about the hopefully-loyalty-bought servants. We are, after all, not unlimited in our wealth, are we? And NiNY has never happened, has it?
But think about how earthquakes, fires, hurricanes and tsunamis have happened — and happened pretty frequently at that. And think about what can really be a drag on top of a drag on top of a drag: something terrible befalling you and everyone around you — your entire city, which hopefully you are madly in love with, as people in New Orleans seem to be — so that it’s a bad scenario, but not so bad a scenario as a NiNY scenario, and you just happen to have zero cash on hand and all the ATM machines are out, and are probably going to stay out for the better part of a week or two. Now what’ch’ya gonna do?
So I am also a big believer in people having a lot more cash on hand — bills, not digits — than most people have on hand.
And having lived through the 1989 Loma Prieta earthquake here in SF (“The Pretty Big One” we like to call it), I also feel obliged to say this:
your ever-loving bike-riding-butt, in shape
Sound like a plan?
This plan acknowledges that we don’t need to send Donald’s servants’ kids to school today and that, rather, what we need to do is help send Osama’s prospects’ kids to school today.
If we do that, then there’ll be fewer prospects out there for Osama to harvest, and far fewer people out there contemplating what it would take to do a NiNY and to end the world as we know it.
And then all of us can get back to thinking about how to add to this beautiful world of ours rather than thinking about how to protect us from those who subtract from it.
I mean, I mean, did I just hear myself up above condoning all of us going out and buying guns?
[Please hear that last line in your head using your best early-Arlo-Guthrie, talking-story-song voicing.]
And let’s all keep our fingers crossed and whatever else we can do to help reduce the possibility of NiNY, and to help increase the possibility that the people born today, January 13th, 2006, find themselves to have been born at a most lucky time — a most fortunate time — because, as it turned out, 1/13/06 just so happened to mark the beginning of the very best of times for one and for all and for every one and for every all.
An exquisite balance
Thursday, January 5, 2006 at 2pmBy John Friedman
Well, it’s been a year — and then some — since I wrote.
I’m happy to report that, since I last wrote, the acute depression I was suffering as 2004 wound down — generated exclusively by the results of the 2004 election and therefore properly diagnosed as Post Election Distress Syndrome, or PEDS — passed, so that by January the bliss ninny was back, and I was able to get back to my knitting.
So I came out of my funk, but my worst fears — and then some — about what that election would mean, have in fact come about. Drat.
So as the year starts it feels like we’re in the bad part of the 1980s, when Japan was on an economic tear and we couldn’t do anything right, so that the continued existence over the duration of our lives of the safe, happy place we called home was less assured. But this time the threat comes from our own government, with a big helping hand from China/India/etc. (who are just doing what we would do in their place, i.e., trying to put food on the table of our loved ones) and sucker punches that might even be nuclear the next time around.
For one indication of what we’re doing to undermine our continued prosperity, just look at the new health insurance premiums you’ll be paying this year compared to last year. For many folks, those premiums have roughly doubled in two years, taking what used to be an item of normal monthly expense into the realm of big capital expenditure.
The government hasn’t done anything about that and, in fact, with Part D of Medicare (the so-called “prescription drug benefit,” which is a creature entirely of Republican pedigree), has put all of its heft behind the system as-is — yup, they’ve said “we like it just the way it is” — with private insurers running the show and Big Pharma being allowed to negotiate price with small units rather than large units, all the better to command big dollars with which to buy commercials on the evening news, all the better to get people to buy expensive prescription drugs that their very own doctors don’t want to tell them about because the drugs aren’t really needed, all so that Big Media can make ever more money with the airwaves that we as a people have now fully ceded to them, even though doing so has killed the muscle that the first amendment once had (keep your fingers crossed that the Internet can even that score), even though the first amendment is one of the things that has most helped us be a wonderful place, and even though our elections have been corrupted by the dominance of Big Media (which, now that you ask, is also responsible for Britney Spears putting real musicians out of business).
But enough about what politics hath wrought, enough rant. There’s plenty of time for that. Instead, let’s look at how all of us economic beings (this is, after all, a blog about financial health) feel in the first week of the new year.
It’s good to do so because, at this time of the year more so than any other, we can all judge how well we’ve aligned our economic selves with the other parts of our selves. We can do that by seeing how we feel as we climb back into the saddle — back into our working selves — after being mostly off work for a week or maybe even two.
So how’s it feel?
Many of us find that climbing back into the saddle after being essentially off work for a week or maybe even two is pure torture. We’ve realized how much more we like life when we’re not doing what we do to be economic beings, and even though we might wonder whether we would find it as much fun if our lives were always like one big holiday break, we imagine that we could figure out how to make it great, and that, at the very least, we‘d like to have the challenge.
Others of us find the climb back into the saddle tantamount to coming home, as, for us, being away from work is like being away from our selves — removed from that which is us. Those of us who feel that way probably figured out ways to be working here and there over the holiday, because not working is, in essence, not being.
A subset of us folks in this latter category feel that torture element especially strongly because for us the holidays means family time, and, in an unhappy twist, being with family is like being away from home.
A lucky few of us, though, are at home both when we’re at work and when we’re at play and everywhere in between; we’ve aligned our economic selves with the other parts of our selves (Schedule C filers and business owners note: when it gets harder and harder to distinguish between personal and business expenses, you are accomplishing something that is very good medicine for most people).
So as we climb back into the saddle after our time off, and as we stare at a brand spanking new year ahead of us, all shiny and fresh, we feel good on all accounts: we’re happy to be back at work because there are so many exciting things to look forward to, and to accomplish, in the coming year, just as we’re happy to have had wonderful time off with family and fewer accomplishings to check off the old list. Both are good; both are in balance; both feed the other; both make our world go ’round.
If you are lucky enough and smart enough to get to that lofty state (methinks it takes both), then retirement takes on an entirely different meaning. Indeed, for those few who find the balance described above, the whole idea of a cliff retirement (i.e., the kind of retirement where one day you’re working full time and the next day you’re never going to work again for the rest of your life) looks risky, fraught with peril and just plain ol’ out of balance. Why come to think of it, it could even kill ya!
So as you sit there in your particular saddle the afternoon of January 5, 2006 (or whenever it is that you might be reading this), here’s hoping that you feel both (a) reluctant to be back in the saddle (because you had such a great holiday and want more more more) and excited (because you are so very much looking forward to making the year a wonderful one for your economic self, with much promise, lots to do, and lots of creation and good to be accomplished).
Here’s hoping, then, that both the rearview mirror and the forwardview window make you feel equally (precisely equally) smile-ful, that you feel equally (precisely equally) smile-ful when you contemplate both the social parts and the working parts of your days to come, and that your only regret (not often contemplated, but necessarily contemplated as you go along on your merry bliss-ninny way) is the fact of your own inevitable mortality. But that regret is for a day not today!
Cheers, all,
Informed consent
Wednesday, November 24, 2004 at 8amBy John Friedman
I am embarrassed to say that, after a long day, I often vedge out in front of the tube.
Yes, I often read and do other things, but, yes again, sometimes I just sit there, like a drooling, blathering idiot and do nothing but . . . nothing.
So last night I watched birds in Israel on PBS, and then another thing on there about the Cave of Letters in Israel, where Jews hid out from the Romans millennia ago (not too embarrassed about either of those).
But then I ran out of cultural faire, and ended up watching a new medical show called House MD, which is a CSI-meets-Dr.-Kildare sort of thing, in which mystery ailments are diagnosable only by the brilliant Dr. House, a troubled soul but beguiling in his own strange way.
Last night one of the younger doctors working with Dr. House said something wonderful in response to a challenge put to him by the parents of a teenager needing an unusual, and hard to explain, medical procedure.
The young doctor said,
It’s really quite complicated, so having you be smart about all the medical aspects involved is pretty much out of the question, unless you want to go to medical school for some handful of years. So this is a situation in which informed consent is a bizarre construct. But, really, here’s all you need to know about this procedure: it’s dangerous, it could kill your kid, and you should do it.
That statement struck a nerve because it went to the heart of the sort of difficult decision-making we all must make from time to time — decision-making in realms about which we know next to nothing.
Whenever we’re forced to make decisions in a realm about which we can’t possibly be fully smart, what we as decision-makers need is someone from that unknown realm — a person who lives and works and breathes in that unknown realm — whom we find undoubtedly trustworthy and undoubtedly free from conflicts of interest.
This young doctor had all those qualities, so the parents said yes and . . . well you know how most TV shows turn out, right?
* * *
The financial realm is one of those realms in which most people are clueless.
Just as most of us haven’t a clue about what goes on inside the body, so too most of us don’t have a clue about what goes on inside of many of the components of our financial health — the mutual funds, the insurance policies, the wills and trusts and the like.
And annuities? Forgehdabouhdtit. Most everyone out there owning annuities doesn’t have a clue about why they have them, let alone how they work.
* * *
So what does all that have to do with financial health?
Well, to be financially healthy, each of us needs to come to terms with what it means to be informed — we each need to decide how informed we are going to be about the various financial decisions we make, and what roll we’ll take in becoming informed.
Some people choose to be uninformed, while others choose to be very well informed. And the vast majority of people go for something in between.
So where do you fall on that scale?
Have you ever read one of those twice-a-year mutual fund statements you receive?
Do you know how well your mutual funds did last year? And, if so, compared to what?
And do you know what your will says and why it says what it says? (It is a universal, generically applicable truth that everyone is better off with a will than without one.)
Or do you never read those things, and leave it to others to do right by you?
* * *
It’s good to know where you are on the issue of being financially informed. Know that, and you’ve gotten to first base in terms of your financial health.
And if your financial world has two decision-makers in it, as is the case with couples, it’s good to know where each of you stands on that issue and, since there is no such thing as two people’s inclinations being precisely the same on any given topic — especially in this context — then it’s also a good idea to know how to reconcile your different approaches.
So do you want to be like the parents in the hospital who chose to rely on the good doctor to have your interests in heart and no others, or do you want to go up a learning curve to get smart enough so that you can trust but verify?
It’s important to know.
* * *
It’s especially important to know this about yourself in the financial context because, as noted in here before, the financial services industries are, by and large, not set up to ensure that the people with whom you do business are conflict-free and undoubtedly trustworthy.
Indeed, as I’ll discuss some other time, there is a huge regulatory debate right now about which financial services professionals should owe their customers a fiduciary obligation — the sort of fidelity obligation owed by a trustee to a beneficiary.
Right now it’s pretty clear that, legally at least, if not morally, a lot of financial services professionals are not obligated to just do the right thing vis a vis their customers, i.e., they do not owe a fiduciary obligation to their customers.
Most are subject instead to suitability standards and the like, which, on the just-do-the-right-thing scale, are a couple of notches below the tried and true fiduciary obligation.
So if you’re doing business with those sorts of folks — suitability folks — you had better be well-informed, because they won’t necessarily be looking out for your best interests insofar as the grand scheme of things go.
So it’s a good idea to not go to an insurance guy or gal hoping to get great advise about whether you need insurance or not. Many will provide that great advice; many will not. As for the proportions of the former to the latter, how many people do you know, in business or in friendship, who could say, well, you probably should do XYZ rather than buying ABC from me, so, here, let me look in my address book and get you the number of someone who can help you with XYZ.
What’d’ya think? Are half of us capable of doing that?
Let’s make this a harder and more concrete question, by saying that, if you were to buy ABC from this person, he or she would get a $5k commission, while if you were to go the XYZ route he or she would get zero dollars. Nada. Zilch. Maybe a heart-felt thank you, but nothing that can put food on his or her table.
So how many people do you think would steer you towards XYZ?
Less than half?
Who knows, but the point is that, without fail, if you are talking to an insurance guy or gal about anything having to do with your financial health, they are going to see solutions to your financial needs primarily from within the insurance realm. If there is a better, simpler, less expensive solution that is not insurance-based, they very well might not know about it, let alone have the moral unction to tell you about it.
So you might end up with insurance that is suitable for you, but did the guy or gal just do the right thing by you? Or did that person just fall a punctilio or two short of fulfilling his or her fiduciary obligation to you?
Maybe . . . it’s hard to say.
* * *
But this is for sure:
We is all humans, and humans tend to be self-interested, just like every other animal out there (and that is why altruism is such an interesting and difficult-to-explain behavior for people in all sorts of fields of study, from biologists to philosophers, and from anthropologists to novelists).
So, when it comes to financial health, it’s really helpful to know whether you are able to consistently apply your energy and smarts to getting financially well-informed. And if not, then it’s really helpful to know how to go about making sure that your advisor is being good to you for all the right reasons.
For most of us, as in most things purportedly either/or situations, the answer lies somewhere in between.
* * *
And to all may there be much for which to be thankful.
Me? Gee, I’m still recovering from earlier this month . . but, yes, there is much for which to be thankful.
It’s been a wonderful, wonderful year.
Yay.