One of the long-term legacies of Harford Financial Group that Matt Rehak, our founder, established was a commitment to comprehensive financial planning that covers retirement income planning, investment management, tax planning, insurance, cash flow and debt management, estate planning, medical expenses and long-term care, and college planning. Matt started doing this in the 1980’s when most financial professionals were either stockbrokers or life insurance sales people who were more about selling products than long-term planning. Personally, I feel he was way ahead of his time. Matt really laid a wonderful foundation to running a financial service firm that has allowed us to serve our team and our clients today.
We really believe that the planning is essential before any discussion of financial products. The analogy I like to use is the way that most people invest is like someone telling them to go out on I-95 and drive 80 mph. 40 minutes into the drive, they may ask, “Where am I going?” The response is “I don’t know but keep driving 80 mph.” Everyone is told to invest in their 401k’s and put money in stocks. However, they don’t tell them why and what the goal is. Knowing the goal and destination, I may not need to drive 80 mph. You need to know what you are trying to achieve and then work backwards to figure out how to get there. Additionally, in last several years we have integrated comprehensive financial planning with life centered financial planning. This mixes your goals and values and what is important to you with the comprehensive financial planning.
Today’s article, We Plan for a Reason, comes from the company we use that helps us with life centered financial planning. We have discussed some of those tools with you throughout the last year. One concept that is talked about here is the $Lifeline which we are in the process of rolling out. Essentially, what the $Lifeline does is work with you to achieve the major personal and professional goals that give your life the most meaning and purpose. Of course like virtually everything in life, there is a financial effect and implication to everything we do. This marries your personal goals with your financial goals.
The following letter really articulates well our philosophy and why we plan and why it is at the core of how we serve you. Please enjoy!
We’re still in the early stages of understanding how the coronavirus outbreak will affect global health care and economics for the rest of the year. However, when we look at your most recent $Lifeline, we can see events that we’ve been anticipating for quite some time: children heading off to college, home upgrades, family vacations, elder care for your parents, and, of course, your own retirement.
Here’s why guiding you and your family through these life transitions is still the central focus of our planning, even during a significant bout of market volatility.
1. The big picture is always brighter.
Nobody could have predicted that a virus outbreak would disrupt global business right in the middle of a contentious presidential election cycle. But market history did tell us that the record-breaking bull market of 2009-2019 wasn’t going to last forever. What goes up eventually comes down.
The further you pull back when you’re looking at market returns, the smaller today’s volatility looks, especially in comparison to big life transitions plotted on a 30 or 40-year $Lifeline. Continuing to work towards those events we can see coming is a much more effective strategy than trying to predict the next natural disaster, the next market downturn, or the next president.
2. You have options.
While major market volatility is never about just one thing, the coronavirus is making it hard for companies around the world to buy raw materials from China and sell to Chinese customers. Stocks in the energy, travel, technology, and consumer goods sectors have been hit especially hard.
Luckily, your portfolio is not overly invested in any one company or any one sector. Spreading out your assets across a wide variety of investments – including more stable bonds and cash savings – provides some options during volatility. Diversification gives us the means to scout for rebalancing opportunities when prices are low. It also provides reserves that we can tap if you need a little extra help weathering market fluctuations.
What’s going to guide the decisions we make during this market correction, and the next one? How are we going to decide which levers, if any, to pull, and which to leave alone?
3. Following your $Lifeline.
We can’t plan for the next significant market shakeup. What we can do is use the tools at our disposal to keep you and your family on track to navigate your $Lifeline transitions and achieve your financial goals, no matter what’s going on outside of your home.
That’s why there’s no “one-size-fits-all” answer when folks wonder what they should do during a moment like this. The millennial who just started working and investing is at a very different point on his financial journey than the CEO eying retirement in the next five years. The couple planning to start their own business has different financial needs than the couple with three smart children all angling for Ivy League schools. And the retiree planning to golf her way across the country probably doesn’t have the same concerns as the retiree whose husband is experiencing ongoing health problems.
These scenarios all require their own unique, personalized plans. Some folks will make the most progress towards their goals by sticking to their current saving and investing strategies, even as the markets are unsettled. Others might need to increase allocations to their cash reserves. And still others might look for “buy low” opportunities that will pay off in the long run. In each case, the client’s $Lifeline is our guide, not today’s headlines.
We understand that volatility can be worrying, especially if you’re nearing retirement or newly retired. If you’d like to review your most recent $Lifeline and hear a little more about our current market perspective, make an appointment to visit our offices. Whether news is good, bad, or somewhere in between, you can rely on our Life-Centered Planning process to keep your best interests first and your life goals in perspective.