There are plenty of things that we don’t understand and that’s ok. We don’t have to fully understand something in order to believe.

Understanding versus Believing

A few weeks ago during one of our cold snaps, we discovered our downstairs furnace had a cracked heat exchanger. The HVAC technician capably explained in great detail what the heat exchanger did and how it operated as a component of the overall furnace.

I broadly understood, but not at a high level. My belief that the heat exchanger needed to be replaced did not require a functional understanding. Belief was substantially more important than understanding.

The same principle applies to personal financial issues. We always try to explain financial concepts in an understandable manner. Even so, we realize that some of these explanations will not be fully comprehended during the initial exposure. Just as I found with my furnace, some degree of understanding is all that is needed.

Importance of Trust

Belief leads to trust and both of these elements are necessary for us to have a successful long-term advisory relationship.

It is easy to get all of this backwards. Sometimes we stress about making certain we fully understand a particular topic and spend too much time trying to be an expert in something outside of our realm.

The Danger of Knowing

The danger is over estimating your level of understanding and making decisions based on poorly formed or misinformed ideas. Reading an article about sustainable withdrawal rates in retirement doesn’t mean you have a working understanding of how this applies to your specific situation.

Thousands of client interactions over more than three decades have provided us an excellent framework for our advice. This experience allows us to combine the theoretical with the empirical.

Influencing Better Outcomes

Some of you may have seen our laminated piece titled Influencing Better Outcomes. We generally go over this in prospective client meetings to underscore how these beliefs influence desired outcomes.

Click to enlarge.

The three points under “What We Believe” sum up the primary components that undergird our operating philosophy.

The first and most important belief is faith in the future. The weight of historical evidence makes this optimism realistic. If you are overly worried about nuclear war or the zombie apocalypse, this necessarily taints this belief and makes our work nearly impossible.

Next, we believe that human behavior is often the deciding factor that helps or hurts the ability to achieve specific desired outcomes.

Finally, financial planning and guidance are best rendered on a continuous, not episodic basis.

Does your financial future line up with your beliefs? Ready for a real conversation?

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